Commercial mortgage-backed securities (CMBS) (securities backed by commercial mortgages) experienced a 2.07% delinquency rate in May as multifamily and retail properties showed weaker performance, driving loan defaults.
It marks the highest CMBS delinquency rate ever recorded by Fitch Ratings since beginning its loan delinquency index in 2001!
“Defaults on larger loans continue to drive delinquency increases because later vintage transactions (closer to the peak of the housing bubble) have larger loans, many underwritten with now unrealized proforma income, as well as now-depleted debt service reserves and high leverage,” says US CMBS group head Susan Merrick in a media statement today.
One of the largest delinquent loans included in the index, Mansions Multifamily Portfolio, was added in the month, accounting for some of the jump from 1.78% at the end of April. The portfolio, worth $160m, consists of four cross-collateralized and cross-defaulted loans, according to the rating agency.
Fitch says declining performance, particularly in oversupplied markets, as well as in secondary and tertiary markets, pushed the multifamily delinquency rate to 4.55%, the highest of all property types. Multifamily properties are highly susceptible to default in CMBS during the current economic downturn, according to the rating agency.
My comments:
This will certainly Not be the all time record of defaults, the worst is yet to come!
I have seen estimates that as many as 1/3 of all commercial mortgages will default in the next few years, which will Decimate the CMBS values and with them, the balance sheets of the banks, insurance companies and pension funds that are the their biggest holders.
I have written previously about the peril these commercial mortgage defaults represent to insurance companies and ultimately to your policies.
Showing posts with label commercial real estate. Show all posts
Showing posts with label commercial real estate. Show all posts
Monday, June 15, 2009
Monday, May 18, 2009
Update on the Life Insurance Companies
5-18-09
Dan Ferris, S&A Digest
Yesterday, the government announced it would expand bailout efforts to include insurance companies, earmarking some of the $130 billion in remaining TARP funds to boost confidence in the sector
The reality is that the government can't possibly bail out 18% of the corporate bond market, the entire stock market, and a big chunk of the commercial real estate sector, (the total of the life insurer's asset reserves) not even if it spent 100% of the remaining $130 billion of TARP money on life insurers, which is highly unlikely.
According to a recent report by Bridgewater Associates, between ratings downgrades and actual losses, the 13 largest publicly traded U.S. life insurance companies would need about another $400 billion just to stay afloat. But what if that's not enough? Everything the government has spent so far hasn't been enough to fix anything.
It's a legitimate question, whether losses will be taken by the insurance companies, their investors, and their clients (which is what ought to happen) or whether they'll be taken by the taxpayers (which would be a real crime). I don't see how the government could put it on the taxpayer without risking hyperinflation. It would have to print trillions, which it has done already to no avail.
5-20-09
Wall st Journal says Met Life, one of the largest life insurers, has direct exposure to $36 Bil in commercial real estate. It has tangible equity of $19 Bil. If its commercial real estate investments incur a 25% loss, half of its tangible equity will be wiped out! This may trigger demands from state regulators to replace the loss capital at a time when its stocks will have been hard hit by the loss of its equity! This could set off a Run on the company as panicked policy holders seek to draw out as much of their cash as possible, as quickly as possible.
Insurance companies are in big danger because of their exposure not only to commercial real estate, where various estimated call for a default rate of 30% in $700 Bil worth of CRMBS, Commercial Mortgage Backed Securities, but also to variable annuities where they have guaranteed annuity holders a return of the S&P or better.
Corporate bonds, another "safe" investment for insurance companies, where default rates as high as 10% have been forecast, are yet another troubled area for life insurers.
It is very likely, according to my research that we will see the failure or insolvency of several of the biggest life insurance companies in the world.
What would happen if your life insurance carrier collapsed? http://silverpros.blogspot.com/2009/04/what-would-happen-if-your-life.html
Dan Ferris, S&A Digest
Yesterday, the government announced it would expand bailout efforts to include insurance companies, earmarking some of the $130 billion in remaining TARP funds to boost confidence in the sector
The reality is that the government can't possibly bail out 18% of the corporate bond market, the entire stock market, and a big chunk of the commercial real estate sector, (the total of the life insurer's asset reserves) not even if it spent 100% of the remaining $130 billion of TARP money on life insurers, which is highly unlikely.
According to a recent report by Bridgewater Associates, between ratings downgrades and actual losses, the 13 largest publicly traded U.S. life insurance companies would need about another $400 billion just to stay afloat. But what if that's not enough? Everything the government has spent so far hasn't been enough to fix anything.
It's a legitimate question, whether losses will be taken by the insurance companies, their investors, and their clients (which is what ought to happen) or whether they'll be taken by the taxpayers (which would be a real crime). I don't see how the government could put it on the taxpayer without risking hyperinflation. It would have to print trillions, which it has done already to no avail.
5-20-09
Wall st Journal says Met Life, one of the largest life insurers, has direct exposure to $36 Bil in commercial real estate. It has tangible equity of $19 Bil. If its commercial real estate investments incur a 25% loss, half of its tangible equity will be wiped out! This may trigger demands from state regulators to replace the loss capital at a time when its stocks will have been hard hit by the loss of its equity! This could set off a Run on the company as panicked policy holders seek to draw out as much of their cash as possible, as quickly as possible.
Insurance companies are in big danger because of their exposure not only to commercial real estate, where various estimated call for a default rate of 30% in $700 Bil worth of CRMBS, Commercial Mortgage Backed Securities, but also to variable annuities where they have guaranteed annuity holders a return of the S&P or better.
Corporate bonds, another "safe" investment for insurance companies, where default rates as high as 10% have been forecast, are yet another troubled area for life insurers.
It is very likely, according to my research that we will see the failure or insolvency of several of the biggest life insurance companies in the world.
What would happen if your life insurance carrier collapsed? http://silverpros.blogspot.com/2009/04/what-would-happen-if-your-life.html
Wednesday, April 22, 2009
New Housing Numbers!
From Housing Wire:
Residential: -
"All loans 60+ days delinquent increased from 834,831 as of November 30 to 1,229,051 as of January 31, representing an increase of 47% over the period, the FHFA said. "
"However, prime loans 60+ days delinquent increased by 69.6% while non-prime loans increased by a significantly lesser 23%."
"Reasons for default: 34.1% of homeowners cited curtailment of income as the main cause of default, 19.8% reported excessive obligations, 8.1% said unemployment, 6.5% said illness and 3.5% cited marital difficulties, such as the loss of a spouse’s wages. "
C'MON GUYS! Can't you just be honest and admit it is UNEMPLOYMENT that is "THE REASON?"
How about the government's mortgage relief plans to help homeowners?
"In January 8,953 loan modifications were completed compared to 8,688 in December and the prior 3-month average of 7,926, the FHFA reported. This represents a 3 percent increase in loan modifications by Fannie Mae and Freddie Mac from December 2008 to January 2009."
WOW, 8,953 loan modifications out of 1,229,051 delinquent mortgages! Unfortunately, that will probably be the high water mark for loan mods. The government, quiet as it was kept, on April 9th agreed that bank's did not have to report the losses sustained in its residential mortgages!!!
These losses were the primary drivers behind the banks willingness to consider modifications, short sales, etc. That has been removed!
On the commercial side, we had a hush hush collapse of the 2nd Largest owner of shopping malls in the US! I did see the bankruptcy of General Growth Properties mentioned on CNBC (24 hr Infomercials for Wall St!) and a passing mention on MSNBC.
THE 2ND LARGEST OWNER OF SHOPPING MALLS DECLARED BANKRUPTCY and the stock market went up about 122 points!
Is this amazing or what? Do you really think we are getting the real picture of what is going on with the economy?
This is stunning news, but the worst is yet to come! There are 5 other behemoths in this category as well that will probably be gone by the end of the year!
My sources estimate that up to 30% of all commercial loans will go bad in this Depression!
What will that do to banks and especially insurance companies that are big lenders to commercial real estate? What will it do to the value of the CRMBS, the Commercial Real Estate Mortgage Backed Securities held by municipalities, benefit funds, retirement funds?
The one thing you can count on is that the Fake Reserve Bank, the Government, Wall St and the Mainstream Media will keep the bad news hidden from you, no matter what the cost!
Check out my Tuesday radio broadcast where I bring you up to speed on what is really happening in this economy: http://MyMoneyShow.com
Residential: -
"All loans 60+ days delinquent increased from 834,831 as of November 30 to 1,229,051 as of January 31, representing an increase of 47% over the period, the FHFA said. "
"However, prime loans 60+ days delinquent increased by 69.6% while non-prime loans increased by a significantly lesser 23%."
"Reasons for default: 34.1% of homeowners cited curtailment of income as the main cause of default, 19.8% reported excessive obligations, 8.1% said unemployment, 6.5% said illness and 3.5% cited marital difficulties, such as the loss of a spouse’s wages. "
C'MON GUYS! Can't you just be honest and admit it is UNEMPLOYMENT that is "THE REASON?"
How about the government's mortgage relief plans to help homeowners?
"In January 8,953 loan modifications were completed compared to 8,688 in December and the prior 3-month average of 7,926, the FHFA reported. This represents a 3 percent increase in loan modifications by Fannie Mae and Freddie Mac from December 2008 to January 2009."
WOW, 8,953 loan modifications out of 1,229,051 delinquent mortgages! Unfortunately, that will probably be the high water mark for loan mods. The government, quiet as it was kept, on April 9th agreed that bank's did not have to report the losses sustained in its residential mortgages!!!
These losses were the primary drivers behind the banks willingness to consider modifications, short sales, etc. That has been removed!
On the commercial side, we had a hush hush collapse of the 2nd Largest owner of shopping malls in the US! I did see the bankruptcy of General Growth Properties mentioned on CNBC (24 hr Infomercials for Wall St!) and a passing mention on MSNBC.
THE 2ND LARGEST OWNER OF SHOPPING MALLS DECLARED BANKRUPTCY and the stock market went up about 122 points!
Is this amazing or what? Do you really think we are getting the real picture of what is going on with the economy?
This is stunning news, but the worst is yet to come! There are 5 other behemoths in this category as well that will probably be gone by the end of the year!
My sources estimate that up to 30% of all commercial loans will go bad in this Depression!
What will that do to banks and especially insurance companies that are big lenders to commercial real estate? What will it do to the value of the CRMBS, the Commercial Real Estate Mortgage Backed Securities held by municipalities, benefit funds, retirement funds?
The one thing you can count on is that the Fake Reserve Bank, the Government, Wall St and the Mainstream Media will keep the bad news hidden from you, no matter what the cost!
Check out my Tuesday radio broadcast where I bring you up to speed on what is really happening in this economy: http://MyMoneyShow.com
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