Moody’s Reports Q4 Improvement in Loan Quality for Commercial Real Estate

According to Moody’s Investor Services, the commercial real estate finance market showed signs of positive change during the last quarter of 2007. Among the conclusions reached in the firm’s recently released Structured Finance Special Report is that an upturn in loan quality is playing a role in offsetting the weaker fundamental outlook.  “Last year, Moody’s was prompted to start requiring higher subordination levels because we saw that credit quality within commercial real estate was deteriorating,” Sally Gordon, senior vice president with Moody’s, told CPN today. Gordon and colleagues Tad Philipp, Nick Levidy and Paolo Obias co-authored the report. But, Gordon noted, the tide began to turn during the fourth quarter. “It started to reverse a little, so that’s a good thing.” This year, the positive trend could continue. “There is a difference between the way we calculate loan-to-value compared to investment banks but even by our calculations, which are consistent over time, things are getting better in the first quarter.”