In a part 2 series, commerical mortgage backed securities has been less focused in the media. Residential housing is not the only major concern for the banks. Delinquency rate has risen in commercial mortgage backed securities (CMBS) as predicted from Congressional Oversight Panel (COP) report last year. Here is CNBC's report on the CMBS market:
After two months of very minimal rate increases, the number jumped in April, 23 basis points, to 9.65 percent, "the highest reading in the history of the CMBS market," according to Trepp.
To say the recovery is, as the report notes, "bumpy," is putting it mildly. The rate should be going down for two reasons:
First, as new CMBS deals, which are generally current loans, are added to the pool of all CMBS loans, the larger denominator in itself should push the rate down. Second, "special servicers have been resolving a greater number of troubled legacy CMBS loans than they were 18 months ago," according to Trepp. And yet the rate goes higher.
So now the balance of delinquent loans exceeds $62.8 billion, up from $61.5 billion in March.
To have better understanding of mortgage-backed securities, check out the video of explanation of mortgage-backed securities. Click here:
Last year, Congressional Oversight Panel report gave a grim look on the commercial real estate front, and the real bomb hits in 2011. According to the report, banks could lose $200 - $300 billion in commercial real estate loans and and 'every American' could be affected especially the lost of jobs. This prompted Congress to write a letter to the Treasury Department on their concerns of the commercial real estate market from the COP report. The question should be asked : Is another property collapse coming? We shall see. Stay tuned.
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