Loan defaults and bank foreclosed hotels are increasing in numbers across the country. And the rate of shutdowns due to foreclosures is expected to take off in a pace that brought alarm to industry experts. They said that more and more hotel owners are turning their backs away from their properties.

According to experts, the pool of commercial mortgage backed securities (CMBS) has a total unpaid balance of more than $835 billion. About $8.6 billion securities are guaranteed by hotel loans which will due in 2010. And one third of the total loans are in danger of defaulting.

Market data showed that about 20 percent of the total CMBS loans that are due in 2010 are hotel loans. Hotel CMBS loans totaled 3,800, with 2,300 taken out in 2007 and 2006. No hotel CMBS loan was made in 2008.

In January 2008, about .48 percent of the total hotel CMBS loans were at risk of defaults. Trepp LLC, a commercial mortgage and CMBS information provider and hotel loans tracker, said that in the first month of this year, the percentage of delinquent hotel loans rose to 1.72 percent. And the percentage of potential bank foreclosed hotels went up this July by 1.22.

A market report released in the first three months of this year showed that the total value of hotel properties in danger of foreclosure was pegged at about $9.0 billion. In the following three months, the total value in default increased almost twice, reaching $17.3 billion. In the following quarter, the total value in default is expected to reach about $19.3 billion.

Highland Group partner Mark Skinner said that before a property can become a bank foreclosed hotel, the owner usually contacts the special servicer to discuss the debt service. He said that the distressed owner usually receives a letter from the debt servicer when the loan starts to become delinquent.

Industry experts advised hotel owners struggling to pay their mortgage to talk and negotiate early with lenders. They said that defaults are increasing across all types of hotels and resorts in the country. Unfortunately, lenders are not keen on taking back troubled assets and that puts about 5.4 percent of the total hotels in the country in default and at risk of becoming bank foreclosed.