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Five Years Later: Risky Real Estate Lending Returns

November 21, 2013

A new report from Bloomberg Brief shows risky lending is back for office, mall and hotel properties. An analysis of 2013 data found that half of all commercial loans bundled into securities are backed by interest-only (IO) or partial IO loans. The same trend prevailed before the height of the financial crisis in 2007 when 80 percent of all commercial mortgages were interest only or partial IO loans.

“IO and partial IO lending is fueled by low interest rates and a perpetual race among investors to get better returns,” said Aleksandrs Rozens (@AleksRozens), editor of Bloomberg Briefs’ special report on the U.S. real estate market.

This month, Bloomberg Brief published a special real estate report showing the latest market data and details how investors are putting money to work in residential and commercial real estate markets as the economy shows signs of recovery. Forward-looking analysis and expert voices weigh in on market trends. For example, Jefferies’ CMBS veteran analyst Lisa Pendergast expects CMBS spreads to narrow by year end. Also, Fannie Mae economists Douglas Duncan and Patrick Simmons warn that a slowdown in the growth of the labor force suggests more modest prospects for the demand for new housing and construction.

Bond sales backed by commercial real estate mortgages are expected to exceed $80 billion in 2013. Some market watchers expect that number to jump to $100 billion next year. What happens if IO mortgages continue to rise in the next year? Find out at