Commercial real estate loans and REO held at banks increased by nearly 30% in the last reporting period. Commercial real estate whole loan problems now top $36B representing only a portion of the commercial real estate loan universe.
Banks increased their commercial REO balances by 32.8% at last reporting (June 30th 2009). Bank owned commercial real estate increased from about $3.6B to $4.8B.
Nonaccrual loans, loans that are likely headed for foreclosure, point to a wave of bank owned commercial real estate just around the corner. Nonaccrual increased by just over 31% to $27.8B, roughly 5X the reported REO balance.
Commercial loans reported as 90 days late increased by 15.8%, only about $500MM. Expect to see increased pressure in commercial real estate portfolios as job losses and sluggish retail sales drag on.
Brokers and investor are scrambling to get in front of this wave and capitalize on it. Many are frustrated by the fact that with CMBS as prominent as it is most distressed commercial leads find their way to one of a small group of special servicers. By contrast the whole commercial loan defaults and REO portfolios reported here are often managed and disposed of by the lender, frequently local and regional banks with accessible personnel.