Waiting for the commercial-property shoe to drop

Will commercial mortgages of the 2007 vintage turn out to be as misguided as residential mortgages in 2006? Fitch Ratings thinks there's a serious risk of that. Does this sound familiar to you?

The phenomenon has granted borrowers easy access to capital and prompted the development of new, more highly leveraged debt structures.
Fitch said properties were also increasingly financed with no money down or even with loans for more than 100 per cent of a property's value as owners borrowed greater amounts upfront to pay interest costs.

Commercial property certainly seems healthy at the moment. But that won't last forever. I'm frankly surprised, given what we've learned about the residential mortgages being written this time last year, that banks haven't tightened up at all on their commercial-property underwriting standards.

Posted by Felix at 13:01 EST