Plan for loans maturing in 2015 and beyond to avoid financial pitfalls
by: Ann Hambly
More than $600 billion of commercial mortgage-backed securities (CMBS) loans were originated between the years of 2005 and 2007, making up a major percentage of legacy CMBS loans. With most CMBS loans having a 10-year maturity date, a huge swell of loans will be maturing in 2015 through 2017, totaling more than $350 billion. Because of the hyper competitive CMBS market from 2005 to 2007, these loans were typically originated as interest only, with little to no reserves and higher-than-average loan to values (LTV). To make matters worse, property values were inflated at the time these loans were originated, meaning that many of the loans were overleveraged by the time of the crash in 2008. Given the characteristics of these CMBS loans from their time of origination, it is anticipated that a large portion of them will be overleveraged.