Trouble ahead for commercial mortgages

Commercial loan defaults are increasing even as residential foreclosures begin to slow. A recent report from Real Estate Econometrics found that the default rate on commercial mortgages rose to 2.25 percent in the first quarter of 2009, up from 1.62 percent in the fourth quarter of 2008, the biggest quarterly jump since 2003. Sam Chandan, president of Real Estate Econometrics, said he expects the default rate to hit 4.1 percent by the end of this year and rise to a peak of 5.3 percent in the fourth quarter of 2011. That could mean foreclosure for nearly $200 billion of the close to $3.5 trillion in commercial properties around the country.