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NEW YORK -- The pricing premiums paid by buyers of commercial real estate loans often fail to reflect the "enormous range in the change in values" of the underlying real estate markets, according to Moody's Investors Service.
Instead, commercial real estate loans trade within a "fairly narrow" band regardless of changes in real estate values, the rating agency concluded after conducting a study of loan pricing.
Moody's senior vice president Sally Gordon said in a news release that the analysis indicates the initial loan spreads "do not proportionately capture, reflect or anticipate variability" in property markets.
"Property market risk is a major factor driving credit performance of the loans backing commercial mortgage-backed securities and of the securities themselves, so loan spreads should incorporate appropriate pricing for ...
Source: HighBeam Research, CRE Loan Pricing Fails to Reflect Land Valuations.(commercial real...