MarketWatch: Commercial Mortgage Woes

[marmar]

CMBS market shows distress as default fears rise
Property values, Paulson's switch on TARP plans send spreads spiking

By Laura Mandaro, MarketWatch


SAN FRANCISCO (MarketWatch) -- Risk premiums on commercial mortgage-backed securities spiked Wednesday, making this corner of the debt market the latest to show signs of mounting distress.

Spreads on indexes that track pools of mortgages made to real estate developers and property owners pushed through new record highs after the pending default of two large commercial mortgages amplified fears of spreading loan losses.

The reaction in the $800 billion-CMBS market reflects investors' growing realization that the economic slowdown is hurting occupancy rates and property values, increasing the risk that property owners will stop paying on their loans.

"Now the market is seeing some cracks in the foundation, some loans are starting to have difficulty, and people are becoming aware of how pervasive the debt bubble is," said Sean Dobson, chief executive of Austin, Tex.-based Amherst Holdings, which specializes in trading mortgage-backed securities.

Dobson said his firm has been advising customers to exit their CMBS positions. ......(more)

The complete piece is at: http://www.marketwatch.com/news/story/Commercial-mortgage-securities-latest-show/story.aspx?guid=%7BCFFCFC96%2DE754%2D4152%2D84B6%2D1E1717BB7139%7D

[Mike 03]

1. Kick. When the CMBS hit the fan, it could easily be far worse than the

residential mortgage crisis. This is the second or third "elephant" that most analysts are choosing to ignore and praying will evaporate by itself.