The Real Deal Miami

Commercial mortgage defaults skyrocket

February 25, 2010 11:22AM

The national commercial mortgage default rate surged in the fourth quarter of 2009, according to Business Week, more than doubling year-over-year. The rate of default on office, retail, hotel and industrial properties reached 3.8 percent in the fourth quarter, approximately double the rate seen in the same quarter a year earlier. Mortgages on multi-family homes, meanwhile, defaulted at a rate more than double seen the year before, up to 4.4 percent from 1.8 percent seen in fourth-quarter 2008. This trend comes amid gradually-improving employment conditions — the jobless rate dropped to 9.7 percent last month from 10 percent in December. “The level of distress [among commercial mortgages] continues to rise irrespective of improving economic trends,” Sam Chandan, the global chief economist with Real Capital Analytics, said. “With the concentration of commercial mortgages in small and community banks, there is a potential spillover that will impinge on their ability to make loans to small businesses and families.”