March 5, 2008 - Commercial Construction Loans: The Next Trouble Spot?
Federal Reserve Vice Chairman Donald Kohn told a Senate Banking Committee hearing that the Fed was keeping a close eye on credit card, home equity and commercial real estate loans as banks cope with a widening range of credit risks.
“The delinquency rate on commercial mortgages held by banking organizations almost doubled over the course of 2007 to over 2 percent,” Kohn said. “The loan performance problems were the most striking for construction and land development loans - especially for those that finance residential development - but some increase in delinquency rates was also apparent for loans backed by nonfarm, nonresidential properties and multifamily properties.”