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Don’t Fear the Floater

Maturing floating rate loans may be difficult to refi, but new borrowers are embracing them once again

By Robert Carr | Updated on August 31, 2011

The good news for borrowers of distress backed by floating-rate loans is that the economy struggled enough to allow cheap yield, allowing for more capital infusion into improving the properties and refinance potential. The bad news for these owners of still-unstable properties, and the investors who back them, is that many of these loans were taken out just prior to the recession and are now seeing maturity, along with likely default and loss of equity.

According to the Mortgage Bankers Association, almost one-quarter of the $190 billion of floating-rate CMBS loans will come due in 2011 and 2012. Most of the $1.4-trillion balance of outstanding commercial/multifamily mortgages, in contrast, is in fixed-rate loans that mature later, starting in 2015.

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