As reported in our most recent Bank Default and Lending Report,the combined default rate on banks' commercial and multifamilymortgage loans fell to 3.75 percent in the third quarter of 2011.The new accounting reflects a 19-basis point drop from the secondquarter's 3.94 percent default rate and a 67 basis point declinefrom the cyclical peak of 4.42 percent a year earlier.

Most Banks Still Drawing Down Exposure toCRE

In spite of the improvement in legacy loan performance, manybanks are still drawing down their exposures to the propertysector. The outstanding balance of banks' multifamily andcommercial real estate loans fell by $3.1 billion during the thirdquarter, reflecting a small net increase in multifamily loans and alarger offsetting decline in commercial loans.

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Dr. Sam Chandan

An irreverent take on the macroeconomic environment. Dr Sam Chandan is President and Chief Economist of Chandan Economics and an adjunct professor in real estate and public policy at the Wharton School of the University of Pennsylvania.