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02/12/2008
JPMorgan predicts commercial loan "nightmare" |
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The possible downturn in the commercial property sector in 2009 could light the touchpaper for a wealth of borrowers to try push for less restrictive terms on loans that are on the road to default, according to JPMorgan.
A lack of liquid cash, falling values and the credit drought may see an increase in defaults on risky loans that were taken out between 2005 and 2007, Reuters reports Alan Todd, head of commercial mortgage bond research at JPMorgan, as saying.
Mr Todd claims that many of these loans will become a "nightmare" as a "severely slowing economy, significantly tighter credit requirements and falling commercial real estate property prices force many borrowers to default over the coming years, or to infuse equity at the refinance date".
He said the lenders may face the choice between default or easing loan terms in order to preserve value, wile borrowers may falsely plead to be in "dire straits" in the hope of having their loan terms loosened.
Meanwhile, Ed Stansfield of Capital Economics, has claimed the government's recent bail out was the right course of action but will fail to ignite the commercial property market. |
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