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The Countdown

The Countdown Delinquencies on CRE whole loans held by commercial banks have increased dramatically since the fourth quarter of 2007. And that's only 45 percent of the story. Overall CRE loan payoffs fell off a cliff after Lehman Brothers failed and credit markets ceased functioning. And according to the Real Estate Roundtable, the total rolling maturities for vulnerable commercial real estate loans, CMBS, insurance companies, and banks and thrifts are $1.3 trillion through 2013 and $2.4 trillion through 2018. The refinancing risk will be concentrated between 2010 and 2013. Commercial Real Estate Debt Outstanding by Financial Sector Life Insurance Companies $310.1 Billion $130,117,000,000 120,000 ABS Issuers Commercial Real Estate Delinquencies for Commercial Banks' 2001-2009 100,000 - GSES $197.4 Billion $708.5 Billion 80,000 60,000 Savings Institutions $190.4 Billion 40,000 Millions of Dollars 20,000 Government $163.6 Billion Commercial Banking $1,532 Billion - Agency/GSE-Backed Mortgage Pools $162.2 Billion 2002 2003 2004 2005 2006 2007 2008 2009 Who's at Risk? All Others $170.1 Billion The CRE market accounted for $3.4 trillion at the end of the third quarter–6.5 percent of outstanding credit market debt. Commercial banks hold roughly 45 percent of this debt, the preponderance of which is concentrated among small to midsize institutions. At the height of the credit boom, the mega-banks' voracious appetite for residential real estate pushed smaller institutions into the CRE market. But these local banks weren't the only players in this segment; commercial mortgage-backed securities (CMBS) issuers gener- ally poached higher-quality loans, leaving the banks to finance riskier propositions. Large banks, pensions and insurers have greater exposure to CMBS. Source: Federal Reserve March 10, 2010 • PAGE 12 PERSONAL FINANCE • www.PFNewsletter.com • 703-394-4931 The Countdown Delinquencies on CRE whole loans held by commercial banks have increased dramatically since the fourth quarter of 2007. And that's only 45 percent of the story. Overall CRE loan payoffs fell off a cliff after Lehman Brothers failed and credit markets ceased functioning. And according to the Real Estate Roundtable, the total rolling maturities for vulnerable commercial real estate loans, CMBS, insurance companies, and banks and thrifts are $1.3 trillion through 2013 and $2.4 trillion through 2018. The refinancing risk will be concentrated between 2010 and 2013. Commercial Real Estate Debt Outstanding by Financial Sector Life Insurance Companies $310.1 Billion $130,117,000,000 120,000 ABS Issuers Commercial Real Estate Delinquencies for Commercial Banks' 2001-2009 100,000 - GSES $197.4 Billion $708.5 Billion 80,000 60,000 Savings Institutions $190.4 Billion 40,000 Millions of Dollars 20,000 Government $163.6 Billion Commercial Banking $1,532 Billion - Agency/GSE-Backed Mortgage Pools $162.2 Billion 2002 2003 2004 2005 2006 2007 2008 2009 Who's at Risk? All Others $170.1 Billion The CRE market accounted for $3.4 trillion at the end of the third quarter–6.5 percent of outstanding credit market debt. Commercial banks hold roughly 45 percent of this debt, the preponderance of which is concentrated among small to midsize institutions. At the height of the credit boom, the mega-banks' voracious appetite for residential real estate pushed smaller institutions into the CRE market. But these local banks weren't the only players in this segment; commercial mortgage-backed securities (CMBS) issuers gener- ally poached higher-quality loans, leaving the banks to finance riskier propositions. Large banks, pensions and insurers have greater exposure to CMBS. Source: Federal Reserve March 10, 2010 • PAGE 12 PERSONAL FINANCE • www.PFNewsletter.com • 703-394-4931

The Countdown

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This graphic originally appeared in print as a means to illustrate the looming pitfall of delinquent Commercial Real Estate Debt.

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