Although the news to follow might seem distressing and the idea of purchasing an Ann Arbor MI home may make you very nervous in this market, keep in mind that it may just be the perfect time to buy. Interest rates are at all time lows and it's certainly a buyer's market.
Recently the CoStar Group, a commercial real estate information company, performed its first analysis of delinquent and distressed properties in the CMBS (Commercial Mortgage Backed Securities) market.
What's a CMBS Loan? According to Wells Fargo,
"Commercial Mortgage Backed Securities are a collection of single mortgage loans brought together into one “securitized” pool, then transferred to a trust. The trust issues a series of bonds that are sold to investors. Pooling the loans allows bond investors access to risk/reward combinations that are otherwise unavailable to them when investing in individual loans. It also decreases their risk of investing by creating a diverse range of property types, sizes, and markets. This in turn creates a much larger and more stable pool of mortgage money, affording borrowers access to larger loans with lower rates. But since your loan affects the return on these bonds, there are some rules about changes that can and cannot be made once your loan is securitized."
Historically CMBS loans have been fairly insulated from market flux because of such diversification. In 2008, distressed CMBS loans were at a historic low (less than 1%) as compared to distress in commercial bank and thrift loans (2.32%). Analysts believe however that this CMBS solidity may be eroding based on the recent CoStar review. CMBS loans placed in "special servicing" (some indication of delinquency) rose drastically from September 08 to November 08, increasing by about $1.2 billion (from 400m to 1.6b). Accounts with identifiable credit issues also nearly doubled.
data source: www.costar.com
data source: www.costar.com
Kathy Toth & Team: Ann Arbor Area Real Estate Experts
www.KathyToth.com
Keller Williams Realty
