By the fourth quarter, commercial mortgage defaults from banks could soar past levels not seen in nearly 20 years, according to the FDIC.
Scant refinancing will drive the default rate, which is projected to be at 4.1% by the end of year. Real Estate Econometrics, a property tracking research firm, said the projection is tied to nearly $44.3 billion of commercial mortgages based on the $1.08 trillion of the loans held by banks in the United States.
According to the FDIC, commercial defaults climbed 2.3% in the first quarter or to $3 billion from 1.6% in 2008 for the same period.
As five-year loans originated in 2005 and beyond come due, the default trend is set to continue in 2010 and in 2011. A peak is set to come in 2011 before the start of a decline in commercial mortgage defaults, Real Estate Econometrics data showed.
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