It's 2007 Again for Commercial Mortgage Bonds, Moody's Says
- Share of riskier interest-only loans are on the rise in deals
- Growth poses ‘significant negative credit trend,’ analysts say
Photographer: Chris Rank/Bloomberg
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Commercial mortgage bonds are getting stuffed with the lowest-quality loans since the financial crisis by one measure, according to Moody’s Investors Service, a warning sign that the $517 billion market may be headed for harder times.
The securities are backed by as many interest-only mortgages as they were in late 2006 and early 2007, Moody’s said. Those loans are riskier because borrowers don’t pay any principal early in the debt’s life. When that period expires, the property owners are on the hook for much higher payments.