Potential Impact of COVID-19: Increased CRE Loan Defaults

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The future effects of the COVID-19 pandemic are impossible to predict. However, there are ways to get a gauge on its potential impact. For example, to get an idea of the virus’s disruption on commercial real estate loans, the research company Trepp recently applied an economic and real estate forecast scenario on 12,500 portfolios.

According to GlobeSt.com, the results of this study were what many may have predicted: commercial real estate loan defaults are expected to rise, in some cases exponentially. Under Trepp’s scenario, the cumulative default rate across commercial mortgages overall will increase to 8%, up significantly from the current default rate of 0.4%. However, it is important to note that while these defaults will likely be severe, they are projected to not be as bad as the defaults experienced during the Great Recession.

If you are worried about defaulting on your commercial real estate loan as a result of COVID-19, our lawyers here at Busch, Slipakoff, Mills & Slomka, LLC are available to answer any of your questions and act as your ultimate legal resource. Contact us today to learn more.