Stating the Obvious

The five-year mortgages issued in 2007 are coming due in 2012.  Who'd have thunk it?  Here is a gloomy Bloomberg article discussing the depressing prospects for these mortgages.  There are plenty of good statistics in the article, like late payments on "loans packaged into bonds" being at 9.13%, or $55 billion of loans in bonds mature in 2012, or that there has been $28 billion of new CMBS in 2011, up from $11.5 billion last year.  (At the start of the year, I remember reading that analysts were estimating CMBS issuance of $30 billion to $40 billion in 2011.  Financial uncertainty in the third quarter slowed the CMBS origination market.)

These paragraphs make sense but are not new information:

Loans underwritten during the peak five years ago will be challenged by tighter lending conditions, limited borrower equity in the buildings and the large size of loans relative to current property values, S&P said. Property values have tumbled 42 percent since 2007. 

Lenders are willing to write a mortgage for a maximum of 70 percent of a building’s value, meaning about 63 percent of loans taken out at the height of the property market bubble will be hard to refinance unless the borrower injects additional cash, S&P said.

There is always "extend and pretend," which is not discussed, and is the probable reality for most of these loans.