Jan. 2 at 8:16 PM
MBA:
$117B of commercial mortgages tied to offices which either need to be repaid or refinanced in 2024
Unlike US residential home loans, commercial mortgages are almost entirely interest- only & face a balloon payment equal to the original loan the day the mortgage comes due and/or renew at a much higher rate. Many of those were taken out a decade ago when interest rates were far lower. Since then, commercial mortgage rates have nearly doubled.
However, the expected losses at this point are on a much smaller scale than during the 2008 housing crisis. Delinquencies on those loans — which tend to be backed by higher-quality or lower-leveraged buildings — are rising, but are still very low at just 1.5% at 3QE23.
In Dec, a group of US economists found that 38% of office loans on bank balance sheets were under water, potentially causing problems for dozens of regional banks. About 2/3rds of the soon-to-be due mortgages are held by banks.
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