Commercial Mortgage Default and Refinancing Risk: A Primer

In the period 1993-2006, commercial mortgages and commercial mortgage-backed securities provided highly competitive returns, on a risk-adjusted basis, relative to other investments in the stock and bond universe. The severe 2007-2009 financial market meltdown, induced by the downturn in the housing bubble, provides a stiff challenge to the continuation of previously strong results. Corcoran examines historical performance of commercial mortgage defaults and seeks to draw inferences about defaults in the unusual 2007-2009 U.S. economic downturn. The article serves as a primer for investors considering relative value in the sector at a bottom-of-the-cycle moment, when relative value is typically high.