Monitoring Risk in Uncertain Times

With 2007 now behind you, some nagging concerns continue to dominate discussions about the entire business landscape associated with commercial real estate (CRE). Twenty-five percent of the inputs to the $10.2 trillion US gross domestic product (GDP) are generated by commercial and residential real estate. Combined with the fact that there is currently more than $3 trillion in CRE debt outstanding, commercial real estate is now considered a legitimate fourth asset class for investment purposes-along with equity bonds and cash. Not only is CRE debt at historic highs, but the net change in commercial and multifamily mortgage debt is rising dramatically on a quarter-to-quarter basis. For all these reasons, regulators are putting increased pressure on financial institutions to invest in more-sophisticated portfolio-management capabilities and to have greater transparency and better data quality across the entire CRE lending, servicing and securitization process.