Watch this interesting discussion on the commercial real estate crisis. Tom Flexner, head of real estate at Citigroup, and Richard LeFrak, president of the LeFrak Organization, talk to CNBC.
Billions in opportunistic private money remain on the sidelines as the large rift between buyers and sellers highlights the state of commercial lending.
Showing posts with label CRE lending. Show all posts
Showing posts with label CRE lending. Show all posts
Tuesday, March 2, 2010
Thursday, February 4, 2010
CMBS Trusts Take Beating As Loans Are Liquidated
December 2009 saw the largest ever liquidation of commercial mortgage backed securities. Over half a billion dollars in loans were removed from REMICs (real estate mortgage investment conduits) books. This represents a five fold increase over the same period last year.
Investors in these CMBS bonds lost hundreds of millions. Most of the loans were sold for less than 50% of their face value and some even sold for less then 10 cents on the dollar.
2009 ended with loans over $60 billion in special servicing, up from only $12.8 billion 12 months earlier. A loan that is in special servicing is a loan that is either in default or likely to default soon.
Over $40 billion of CMBS loans were behind in payments as of the end of December, according to Realpoint, a nationally recognized credit-rating agency.
Investors in these CMBS bonds lost hundreds of millions. Most of the loans were sold for less than 50% of their face value and some even sold for less then 10 cents on the dollar.
2009 ended with loans over $60 billion in special servicing, up from only $12.8 billion 12 months earlier. A loan that is in special servicing is a loan that is either in default or likely to default soon.
Over $40 billion of CMBS loans were behind in payments as of the end of December, according to Realpoint, a nationally recognized credit-rating agency.
Monday, December 21, 2009
CMBS Market Thaws As Defaults Increase
Government intervention appears to have a positive affect in reviving the moribund CMBS market which died following the sub-prime crisis in 2007. The federal reserve has been buying CMBS's as well as providing fresh capital to banks through the TALF program which allows banks to put up qualified CMBS and CDO's as security for new loans at very loan rates. The banks can then use these funds to issue new securitized loans to fund purchase and refinance of commercial loans.
Recent private CMBS offerings have had positive receptions in the market including a recent offering by JPMorgan in which Inland Western Retail Real Estate Trust Inc., an Oak Brook, Ill.-based non-listed REIT, closed a $625 million loan.
Wells Fargo, Goldman Sachs, Bank of America and JP Morgan, all have already announced their involvement in new CMBS deals.
Recent private CMBS offerings have had positive receptions in the market including a recent offering by JPMorgan in which Inland Western Retail Real Estate Trust Inc., an Oak Brook, Ill.-based non-listed REIT, closed a $625 million loan.
Wells Fargo, Goldman Sachs, Bank of America and JP Morgan, all have already announced their involvement in new CMBS deals.
Monday, December 7, 2009
Mortgage Trade Group Reports Increased Commercial Delinquencies
Commercial real estate loans showed continued increases in the rates of delinquencies, the Mortgage Bankers Association (MBA) reported in a recent survey.
MBA's Commercial/Multifamily Delinquency Report keeps records on delinquencies of commercial real estate loans.
Last quarter borrowers of commercial mortgage backed securities (CMBS) loans topped 4 percent during the quarter. They also reported that life insurance companies who own commercial loans had loans that fell behind at an increase by a 1/4 of a percent and the 60+ day rate on multifamily loans in Fannie Mae's portfolio increased by 0.11 percentage points to 0.62 percent.
The increase in delinquency rates is expected to continue throughout 2010 and peaking in 2011. There is about $300 billion in negative equity overhang that needs be refinanced in 2010 and 2011. Much of these loans will end up in foreclosure or sold as short sales or modified to either extend the loan maturity or reduce the principal balance.
The government recently announced guidance for prudent commercial loan work outs. This policy change, while beneficial for some borrowers only serves to extend the problem as banks are unwilling to write down loan balances when their government handlers and owners let them keep the loans on the books at full value in the absence of mark-to-market accounting.
MBA's Commercial/Multifamily Delinquency Report keeps records on delinquencies of commercial real estate loans.
Last quarter borrowers of commercial mortgage backed securities (CMBS) loans topped 4 percent during the quarter. They also reported that life insurance companies who own commercial loans had loans that fell behind at an increase by a 1/4 of a percent and the 60+ day rate on multifamily loans in Fannie Mae's portfolio increased by 0.11 percentage points to 0.62 percent.
The increase in delinquency rates is expected to continue throughout 2010 and peaking in 2011. There is about $300 billion in negative equity overhang that needs be refinanced in 2010 and 2011. Much of these loans will end up in foreclosure or sold as short sales or modified to either extend the loan maturity or reduce the principal balance.
The government recently announced guidance for prudent commercial loan work outs. This policy change, while beneficial for some borrowers only serves to extend the problem as banks are unwilling to write down loan balances when their government handlers and owners let them keep the loans on the books at full value in the absence of mark-to-market accounting.
Wednesday, November 11, 2009
Fed Survey Shows Banks In Line With Pretend & Extend
The Federal Reserve released its Senior Loan Officer Opinion Survey on Bank Lending Practices. The results showed an increase in residential lending over the past three months but showed a continual decline in commercial lending activity.
The survey asked bankers why CRE lending has declined in 2009 and also addressed commercial real estate loans on their books that were scheduled to mature by Sept 09.
The table below shows their responses:
The survey showed that 75% of respondents said they had extended at least 25% of the loans that were maturing. This indicates that commercial real estate loans are frequently being extended.
This statistic will no doubt go up next year as the brunt of the maturing commercial loans come due. These maturing loans were often the most toxic loans made at the height of the bubble at a time when underwriting guidelines were at their lowest historical levels.
The chart below shows the demand for commercial real estate is at extremely low levels even with a spike in maturing loans looming.
The survey asked bankers why CRE lending has declined in 2009 and also addressed commercial real estate loans on their books that were scheduled to mature by Sept 09.
The table below shows their responses:
This statistic will no doubt go up next year as the brunt of the maturing commercial loans come due. These maturing loans were often the most toxic loans made at the height of the bubble at a time when underwriting guidelines were at their lowest historical levels.
The chart below shows the demand for commercial real estate is at extremely low levels even with a spike in maturing loans looming.
Tightening credit standards for commercial loans indicate that the months ahead present significant challenges for commercial real estate financing in the foreseeable future. The chart below shows the increasingly tight credit standards are being applied to new loans.
The complete survey results can found here http://www.federalreserve.gov/boarddocs/SnLoanSurvey/200911/fullreport.pdf.
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