Although the news to follow might seem distressing and the idea of purchasing an Ann Arbor MI home may make you very nervous in this market, keep in mind that it may just be the perfect time to buy.  Interest rates are at all time lows and it’s certainly a buyer’s market.

Recently the CoStar Group, a commercial real estate information company, performed its first analysis of delinquent and distressed properties in the CMBS (Commercial Mortgage Backed Securities) market.

What’s a CMBS Loan? According to Wells Fargo,

“Commercial Mortgage Backed Securities are a collection of single mortgage loans brought together into one “securitized” pool, then transferred to a trust. The trust issues a series of bonds that are sold to investors. Pooling the loans allows bond investors access to risk/reward combinations that are otherwise unavailable to them when investing in individual loans. It also decreases their risk of investing by creating a diverse range of property types, sizes, and markets. This in turn creates a much larger and more stable pool of mortgage money, affording borrowers access to larger loans with lower rates. But since your loan affects the return on these bonds, there are some rules about changes that can and cannot be made once your loan is securitized.”

Historically CMBS loans have been fairly insulated from market flux because of such diversification. In 2008, distressed CMBS loans were at a historic low (less than 1%) as compared to distress in commercial bank and thrift loans (2.32%). Analysts believe however that this CMBS solidity may be eroding based on the recent CoStar review. CMBS loans placed in “special servicing” (some indication of delinquency) rose drastically from September 08 to November 08, increasing by about $1.2 billion (from 400m to 1.6b). Accounts with identifiable credit issues also nearly doubled.

According to CoStar’s research, they found a total of $8.2 billion in CMBS loans that were in some sort of delinquency (1,200 loans). They also identified 6,100 additional loans with a flag for credit concerns ($57.8 billion). Of some surprise was the states in which were experiencing trouble, CoStar expected to see problems in dense commercial centers yet the statistics appear to closer reflect trouble in those states where residential housing is already in crisis (such as Michigan), at least for now:

Data Source: CoStar.com

State, No. of Delinquent CMBS Loans
Texas, 171
Florida, 126
Michigan, 83
California, 81
Georgia, 71
Ohio, 71
New York, 70
Nevada, 42
Arizona, 39
Illinois, 34

State, Number of Potential Problem Loans
Texas, 890
California, 741
New York, 445
Florida, 432
Ohio, 269
Michigan, 247
Georgia, 219
Arizona, 212
Illinois, 180
Pennsylvania, 180

Delinquencies do appear to be fueled by the housing recession with multifamily loans being hit hardest. The overall assessment was that while CMBS loans remained fairly insulated throughout most of 2008, they will be exposed in 2009. Wall Street predicts a 300% increase in delinquencies this year.

You’ll find the complete CoStar Article here: CRE Loan Distress Levels Escalating Rapidly

If your Ann Arbor commercial real estate is distressed, please don’t hesitate to call our Ann Arbor Short Sale experts. The process is confidential and free. You can start online at www.AnnArborShortSale.com or call the Toth Team at (734) 669-0337. We are here to help!

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Kathy Toth & Team: Ann Arbor Area Real Estate Experts

www.KathyToth.com

Keller Williams Realty

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