By Amy Wyeth
Banker & Tradesman Reporter

Interest rates on commercial mortgage-backed securities are going to rise, loan delinquencies will go up and capital will diminish in the commercial market in the coming year, according to industry experts.

But apparently, that is no reason to panic, lenders and analysts told Massachusetts developers at a breakfast this morning sponsored by commercial brokerage Fantini & Gorga.

“We all know the market is cyclical,” said Deutsche Bank Mortgage Capital Vice President Scott Miller.

Commercial mortgage-backed securities, one of three major sources of funding for commercial real estate developers and builders, had their “day in the sun” a couple of years ago, he said. 

Today, that spot is reserved for the other two primary funding sources – life insurance companies and banks – which some see as a more stable, less expensive alternative to CMBS.

Some hedge funds are betting that commercial delinquency rates, currently less than 1 percent, could rise as high as today’s subprime residential 60-day mortgage delinquency rate of 36 percent, said Michael Berman, president of Needham-based national commercial real estate financing firm CWCapital.

Berman predicted the CMBS market will take two to three years to get back to “normal” levels.

But normal won’t be the same as before, he said.
“It’s [no longer] a $200 billion industry,” he said.  “It’s going to be closer to $70 billion.”