All is Lost!

From Bloomberg.

More than half of commercial mortgages packaged into bonds in 2007 and coming due next year may fail to refinance as maturities reach the most evah and lenders pull back, according to Standard & Poor’s.

Nearly 30% of 2007 CMBS loans carried 5 or 7 year maturities...

About $55 billion of property loans sold as securities come due in 2012, with $19 billion of those originated in 2007, S&P analyst Larry Kay said in a report today. The five-year mortgages have a 50 percent to 60 percent likelihood of failure to refinance, the New York-based analyst said.

Next year will “usher in the first major wave of maturities from the 2007 vintage, which were issued during a frothy period at the peak of the market,” Kay said.

Is the Wave of Mutilation finally upon us? Some say yes...

“Retrenchment in the capital markets and among other lenders in the third quarter of 2011, which has continued into the current quarter, dims the refinancing prospects.”

So, it's kind of a big deal - no money is being lent, the loans maturing contain more underwater crap than ever before, and any money that is being lent is under onerous terms :(

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.