I wrote a week or two back about my expectation that significant economic dislocation awaits us. I still think that. The morning after I published, hordes (ok, maybe not hordes) of PhD Villeins were outside my house with pitchforks and burning torches, loudly asserting that I had wildly overstated the likelihood of material distress in … Continue Reading
I’ve been offline for a bit. An amalgam of writer’s block caused by the enormity of the Coronavirus mess – what can be said that’s useful – and the consequence of being wildly busy as everyone across financial markets tries to pivot to the new reality. Unburdened by any knowledge of science, medicine or epidemiology, … Continue Reading
Here is something helpful that has surfaced amidst the fallout, pain and confusion of the global COVID-19 crisis. The implementation date for the all-too-simple in theory but not-simple-at-all in practice CECL accounting standard has been pushed back by the passage of the CARES Act for banks until the COVID-19 national emergency declared by the president … Continue Reading
The spread of COVID-19 has created a new reality for the hospitality industry. As of March 25, the CDC reported 54,453 confirmed cases in the U.S., and the number is expected to grow exponentially. In the hopes of slashing infection rates, governments have implemented international travel bans, shelter-in-place orders and other restrictive measures. The second-most … Continue Reading
Beany & Cecil was a cartoon. The Current Expected Credit Loss accounting rules, better known as CECL, which the FASB is insisting will go into effect at the beginning of next year for publicly traded banks and lenders and a year later for all other GAAP reporting entities is not. Now, heaven forfend that I … Continue Reading
Morningstar has published a proposed method for rating single-asset/single-borrower (SASB) transactions. The new approach is slated to replace the “U.S. CMBS Subordination Model” with respect to SASBs and other forms of CMBS securities with similar credit and diversity profiles, including large-loan transactions and rake certificates. Morningstar has issued a request for comments on the proposal. … Continue Reading
In case you’ve been too busy sifting through fake news to follow efforts to reform the High Volatility Commercial Real Estate (HVCRE) regulations that affect acquisition, development or construction (ADC) loans, here’s where we are and where we think we are going.… Continue Reading
Our friend, Dan Rubock, just inked an interesting and timely piece entitled, “Key pillars of loan structural quality are eroding, especially in single-borrower deals.” As usual, Dan’s views at Moody’s are worth considerable attention. That piece focused on bad-boy carve-out guaranties, the quality of borrower financial information, property release provisions, qualified transfer provisions and cash … Continue Reading
Earlier this month, our very own Kenneth D. Hackman, a regular contributor to Crunched Credit, moderated a panel entitled Single-Family Rental: The Landscape and Future of CRE’s Newest Asset Class, hosted by Dechert LLP, for CREFC’s After-Work Seminar Series. The esteemed panel consisted of Kevin S. Dwyer, Senior Vice President, RMBS, Morningstar Credit Ratings, LLC; … Continue Reading
What in the world have we done to ourselves? Our CRE Securitization business, or at least the conduit part of our business, continues to shrink: $800 billion in outstanding principal balance in 2007 and now, $400 billion? Maybe, right now, we’re at a run rate of $50 billion per year. Is that enough? Does that … Continue Reading
This is all about the difficulty of taking the punch bowl away from a roaring good party. Over the past several weeks a number of major banks folded under enormous pressure from the US DOJ to settle fraud claims resulting from the sale of bonds prior to the financial crisis of 2008. The allegations here … Continue Reading
Returning to our theme that nothing’s easy and everything keeps changing, here is one out of left field. Let’s talk Probable Maximum Loss (“PML”) and seismic risk. ASTM International, the market standard setting organization for everything from toilet bowls to condoms, has just issued an amended seismic standards: Standard Guide for Assessments of Buildings (E2026-16) … Continue Reading
And now to return to our commentary a few weeks back about the stultifying impact of ill-thought through rules and regulations (at best) (Brexit has intervened). This is our Regulatory State which broadly attempted to pick winners and losers and modify market behavior, to get an engineered outcome by using the blunderbuss of proscriptive rules … Continue Reading
We thought it would be useful to give a quick, interim update on the slow-motion train wreck that is our industry’s response to the upcoming effectiveness of the Risk Retention Rule. For those of you who have been blessedly snoozing under a rock these past couple of years, the Risk Retention Rule becomes effective on … Continue Reading
As we do each year at Crunched Credit, we take the end of a calendar year as an opportunity to stop and reflect on where we are, and what the next year might hold. Recognizing the certainty that a successful prediction is more a random event – a blind cat finding a dead mouse, than … Continue Reading
Never a dull moment. We at Crunched Credit are probably guilty of excess and perhaps myopic focus on our federal government and its regulatory apparatus; it is such a consistently reliable source of commentary and outrage. So here’s one out of left field, but no less important for that. … Continue Reading
Last week, the Federal Housing Finance Agency (“FHFA”) has joined the chorus of opponents, expressing “significant concerns about the use of eminent domain to revise existing financial contracts”. We at CrunchedCredit have recently covered the eminent domain proposals being considered by Chicago and San Bernardino County. … Continue Reading
Recently, the Wall Street Journal highlighted the arrival of “bad loan securities.” If this is a trend, and I both hope and think it is, we clearly have to get a better deal name for these than “Insert Bank Name”, Bad Loan Securities 2012-1. Securitization of less than ideal conduit product has been with us since the birth … Continue Reading
On May 5, SIFMA hosted a Spotlight Series: Risk Retention and Qualified Residential Mortgages. It was immediately apparent that unintended consequences of the proposed risk retention rules (pdf) abound. The panelists acknowledged that the regulators had a very tough mandate, and that the rules are way more complicated than anticipated. It was estimated that approximately … Continue Reading
Although there is renewed optimism for a vibrant CRE lending market in 2011 (or at least a significantly better market than the prior 3 years), many lenders and servicers continue to face challenges in dealing with delinquent or defaulted commercial mortgage and mezzanine loans (whether held on balance-sheet or securitized). The volume of these “scratch … Continue Reading
Last week, the Supreme Court of the State of New York handed down a decision in the battle between CWCapital, representing the senior mortgage debt as special servicer, and Pershing’s andWinthrop’s joint venture, who recently bought the mezz debt in this transaction at a deep discount. Everyone knows what’s going on here. The mezz debt was bought as a lever to … Continue Reading
As a follow up to my earlier post, we just issued this article (pdf) about the IRS’ recent Revenue Procedure (pdf) regarding the REMIC rules. The problems inherent in last September’s REMIC Regulations have been well-covered in this blog. In short, the IRS surprised the industry by requiring a mortgage loan to pass an 80% value-to-loan … Continue Reading
The commercial banks have largely paid it off, GM has paid it off, and even AIG says it will soon pay off the government’s emergency investment to save the Western world as we know it. As to the GSEs: not so much. We’ve got about $150 billion invested in these entities and no end in … Continue Reading
As I discussed in my prior blog post, and this article, last September’s REMIC regulations left servicers, lenders and borrowers in a quandary over the effect the new “principally secured by real estate test” would have on troubled multi-property loans with release features. The new rules, in some cases, could have resulted in adverse tax consequences to … Continue Reading