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Home Loans Now Less of a Toxic Threat than Commercial Real Estate

While the housing crisis is what triggered the economic downturn and pushed so many lenders under early on in the receession, it seems the biggest threat has now shifted from residential mortgages to souring commercial real estate (CRE) loans.

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Commercial real estate seems to have been the downfall of the 12 banks that failed last month, according to a report by New York-based ""Trepp, LLC"":http://www.trepp.com/main.cgi.

It seems banks with a balance of CRE and other types of loans find their CRE loans to be an asset, while banks with high concentrations of the loans struggle to keep up with delinquencies.

The CMBS and commercial mortgage information provider said that nonperforming CRE loans made up $230 million, or 72 percent, of the total $320 million nonperforming loans reported from the failed banks for the month of February.

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Residential real estate loans were a distant second, comprising just 20 percent of the nonperforming pools, or $65 million.

Of those CRE nonperformers, construction loans made up 37 percent of the total, at $119 million, and commercial mortgages made up 35 percent of that total, at $111 million.

According to Trepp, most of the failures occurred in boom-and-bust areas such as Georgia, California, and Florida.

Despite what caused February's bank failures, the ""Mortgage Bankers Association"":http://www.mortgagebankers.org (MBA) reported Thursday that commercial and multifamily loans finished 2010 with the lowest delinquency rates across the board.

According to its report, ""When compared to other parts of the economy and other types of loans at banks and thrifts … the relatively stable performance and low charge-offs of commercial and multifamily mortgages have been a net positive to these institutions through the recent recession.""

The report says that commercial and multifamily mortgages ended last year with lower delinquencies that all other types of loans.

""At the end of the fourth quarter, 6.48 percent of the balance of all bank and thrift loans were 30 or more days past due. Commercial mortgages had a 30+ day delinquency rate of just 5.33 percent and multifamily mortgages recorded a rate of 4.84 percent,"" the report said.