ALSI had a slight increase in the volume of CMBS and commercial portfolio loans that began the non-judicial foreclosure process. 2009 saw a total of $2.8 Billion in notice of defaults filed while 2010 showed and overall increase of 9.2%, ending up just over $3.1 Billion in non-judicial foreclosure starts. Many commercial files enter into delay status for a myriad for reasons: modification, short sale, deed in lieu, legal challenges, etc., but one trend that emerged from the data was the lenders’ and servicers’ increasing willingness to complete the foreclosure process. Further analysis showed fewer files were cancelled, with an increasing number of assets going through sale.

Total ALSI Commercial Files Closed in 2010 vs. 2009

This trend was further validated by a year-over-year increase in completed commercial foreclosures. Within the calendar year of 2010, 80% of commercial foreclosures went to sale, versus 54% for the previous year. This trend of files that were opened and closed within the same calendar year could indicate lenders growing confidence in reo disposition and doubt in the ability of borrows to perform. Additional data supports the conclusion that commercial foreclosures increased in secondary and tertiary markets throughout the West Coast. ALSI saw a 175% increase in Arizona commercial foreclosure files opened and a 117% increase in Washington State in 2010.

ALSI Commercial Foreclosure Distribution

2011 Forecast

ALSI’s forward looking statement is based on the sentiment of CMBS special servicers, legal workout professionals, and institutional portfolio servicers that work with our commercial foreclosure group. Workouts in the small balance pools continue to be difficult to obtain, possibly due to lenders’ and servicers’ increasing confidence in post-foreclosure prospects for selling assets and the continued inability of borrowers to come current with their debt service obligations. With more than $22 Billion in CMBS loans projected to mature in 2011, $1.4 Trillion total in commercial real estate loans requiring refinancing in 2011 through 2014, and the overall economy not healing as quickly as projected, ALSI predicts the commercial real estate market will continue to see an increase in commercial foreclosures starts through 2011 with a leveling-off in 2012.