FRIDAY UPDATE: We got this response today from Dustin Hobbs, spokesman for the CMBA, adding some context to how they do their survey. It's an important distinction in reference to my earlier remark about the lending industry pretending and extending:
"You raise an interesting question about why the ratio is so low. Many other DQ surveys show a 4% or so rate, while ours has stayed remarkably low. The main reason is that most surveys look at CMBS loans - securitized loans, versus ours, which is heavily focused on life insurance-backed portfolio loans - much more conservatively originated. From what I gather from our folks, that is the main difference - life companies did not see the boom that the rest of the commercial real estate industry saw over the past few years. The pool of capital from life companies did not increase substantially, indicating their conservative nature. Bottom line - I'm not so sure is as much 'pretend and extend' as they were just sound loans from the start."
The California Mortgage Bankers Association says commercial loan defaults have been falling. That's a sure surprise given the frequent worries that this is the next sector to endure a wave of foreclosures. Apparently the "pretend and extend" movement by commercial lenders is the real deal.
"Pretend and Extend?" That means lenders and borrowers pretending everything is OK.
The news release ishere