CRE loans can go bad if there is a decline in asset coverage. Depends on the CRE wharehouse agreement.
But a falling asset value reduces covereage for the CRE providor. I guess the higher the loan to asset ratio on each loan the lower the mark to market hence more demand for top ups from CS.
Also I a CRE goes into default penalty interest rates apply, a few % higher. The outstanding interest on the first mortgage would rand ahead of the pricipal and interest of the mezanine financier.
REU Price at posting:
0.0¢ Sentiment: Hold Disclosure: Held
