Commercial Mortgage Backed Securities (CMBS) Defaults Increase

CMBS defaults continue to increase.  Not surprisingly, the 2006 and 2007 vintages faired the worst resulting from the most aggressive underwriting standards in the go-go peak of the market.  For those unfamiliar with these instruments, they account for roughly 25% of the total debt on US commercial property.  The instruments are used primarily for very large commercial deals, packaged to provide some diversity and sold in to the debt markets.  Costar is reporting that Q1 2009 reported defaults rose to 2.25% from 1.62% in Q4 2008.  These markets remain locked, reflecting the lack of confidence investors have for the stability of the assets backing the notes.  (More info on CMBS defaults)