We expect the quality of loans to deteriorate in 2001. There are some poor performing loan deals, with high concentrations in health care and limited service hotels, done between 1995 through 1997. Also, more retailers are expected to file for bankruptcy as the economy continues to weaken, and a reduction in consumption is felt more significantly. Yet, there are no expectations that investment grade CMBS classes that plan to hold to maturity will be affected by any loss in principal. This lender s market should cause a subsequent move down the risk curve.
Borrowers continue to want the most dollars and lowest rate, in that order.
Wants and wishes are not expected to change in the coming year. Commercial mortgage loan delinquency rates are at all-time lows, dramatically below peak rates experienced in the early 1990 s. In 2001 however, we expect commercial mortgage delinquency rates to begin rising. The factors, which led to strengthened commercial property fundamentals and sustained a decline in delinquency rates during the 1990 s, have begun to weaken. Real estate does have its cycles, so we will not be able to ride forever on low delinquency and default levels.