Residential/Subprime Mortgage Crisis Does Not Appear To Be Materially Affecting Commercial Loans – At Least Not Yet

From time to time over the past several months, people have asked me how the sub-prime mortgage crisis and the record number of residential mortgage foreclosures have affected my practice and the industry that I target – commercial, secured lending.  For some context, here’s an article from today from MSNBC – “Want A Second Mortgage?  Good Luck!”.

People outside of the industry are surprised to learn that commercial loans continue to be in pretty good shape.  The clients and prospects I’ve spoken to over the past year have conveyed that their default rates remain very low.  As I understand it, there’s really no comparison between the rates of residential/consumer mortgage defaults and those of commercial/secured loan defaults.  Although I gather that commercial credit may me tightening, the sub-prime mortgage crisis simply hasn’t translated to a commercial loan problem, at least not to this point.  Here’s a story today from the Cincinnati Enquirer entitled “Commercial Building Booms” that supports what I’ve been hearing. 

This is not to say that an increase in commerical defaults, workouts, foreclosures or bankruptcies may not be on the horizon.  I’m no economist, but there certainly are signs for the potential of an up tick in such matters.  Here are links to a couple stories from today’s New York Times that speak to these issues:  Fed Chief Warns of Worse Times in the Economy and Wachovia Sets $1.1 Billion in October Losses.  If your impressions are different than mine, I would appreciate learning more about what you’re experiencing and invite you to call or email me.