A recent report from the FDIC indicates that commercial mortgage defaults rose to 3.82% at the end of 2009, the highest rate seen since 1994. But even with this historical default percentage, the U.S. still has a long way to go before we reach the peak.
As problem lenders continue to land on the FDIC's radar, their losses largely driven by commercial real estate loans, we can expect more bank failures to occur in 2010 and an unpredictable impact on future lending that is essential for stabilization and growth. We could see defaults peak by the end of 2010. The challenge will be to see how financial institutions and Wall Street react to the increase in defaults, and how nimble commercial property owners and note holders are in refinancing and finding other means to dispose of their underperforming properties before foreclosure.
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