2010

I am on a Halloween kick right now – it’s the elections. I hear Zombies are popular this year.  Zombies indeed.  Do you ever think this could be a deeply sophisticated and sly commentary on our GSEs?  How droll.  They are scary.  How about that for a segue.

The private securitization market for residential mortgages is still dead (like Generalissimo Franco) and the GSEs, attached to a fire hose of taxpayer money, continue to fuel 90% of the United States housing market.  But they are insolvent. What apparently worked so brilliantly for twenty-five years is breathtakingly broken.  Call me silly, but I don’t think we’ve got a sustainable model here.  The good news is that no one else seems to think we have a sustainable model either.  There was a symposium at the Federal Reserve last week on the future of housing finance.  I don’t think a lot of progress was made.  I was passingly concerned to see that almost all of the talking heads were academics.  That demographic may be really good at some things; my guess is not so much at rebirthing a functional housing finance market. It struck me as more can kicking.  When in doubt, talk.  Wonk-filled symposiums give birth to papers, not markets.Continue Reading GSEs: The Night of the Living Dead

I’m shocked, shocked! Our elected panjandrums have discovered and the media has slovenly reported with considerable glee (if it bleeds, it leads) that, in processing millions of residential foreclosures, Robosigner signed off on files prepared for foreclosure by nameless employees (or machines). Anything which 47Attorneys General think is a good idea in the middle of a political season to beat most political seasons is, by definition, suspect. I hear fraud tossed around, I’m starting to hear criminal investigation tossed around. And they’re serious. I feel for the poor bastards deep in the bowels of those lenders, just doing their jobs, who may now become “targets.”

Continue Reading Robosigners Destroy the Republic! Really?

A recent Boston Magazine piece on Jack Connors (co-founder of Hill Holliday, Boston College alum and heir to the late Ted Kennedy’s position as city patriarch) noted, quite rightly, that the Hub is somewhat unique among major American cities in that no single industry dominates its cultural identity. In New York, Wall Street is (still) king. DC is lobbyists and Senate Bean Soup. Houston – oil; Los Angeles – alcohol monitoring ankle bracelets. (Not quite over the Lakers yet.) But Boston’s a bit odd – an amalgam of students, doctors, mutual fund managers, Democratic politicians and Democratic mobsters.

And let’s add commercial real estate to the list, as Boston may be among the first metro-areas to awaken from the malaise that has defined commercial real estate for recent memory. Last week – only days after announcing its acquisition of Bay Colony Corporate Center (a story covered here) – Boston Properties announced that it had come to agreement on the acquisition of the Hancock Tower, for $930 million, a stunning conclusion to a distressed-debt success story and the beginning of what some brokers are citing as evidence of a resurgence in demand for trophy office buildings. To give you a sense of the marketing and sale process, Rob Griffen of Cushman and Wakefield (Boston College, ’80) told the Globe that the bidding was “as fierce as anything [he’d] ever handled during [his] 30 years in this business.”
 Continue Reading Sale of Hancock Tower Completes Distressed Debt Turnaround

Why not be optimistic about 2011? Admittedly, those who know me say that if I’m deeply pessimistic it’s time to buy guns, gold and canned food and dig a hole. But why not be optimistic about next year? Let’s tout it up.Continue Reading Why Not?

Last week the FDIC approved its final Safe Harbor Rule regarding securitization. That something that sounds so good could be so bad leaves you thinking: can’t we catch a break in trying to repair this damaged economy? To set the stage a bit, the FDIC has a suite of powers, while acting as conservator or receiver of an insured depository institution (“IDI”), to affirm or repudiate contracts and claim or recover property of the IDI. When a failing IDI securitizes financial assets, these powers allow the FDIC to undo the transaction and re-acquire those assets. The possibility that a securitization would be undone by the FDIC is an existential problem for any proposed securitization. But never fear. So long as a transaction meets all the conditions for sale accounting under GAAP, the transaction is proof against the exercise of those powers. Even better, there is a Safe Harbor! Sounds simple, right?Continue Reading FDIC: Mining a Safe Harbor

The final day of ABS East in Miami closed on Tuesday late afternoon and we’re back home with no suntans.

Those of us who didn’t overdo it on Monday evening (we won’t mention names) started Day 3 at a panel discussion titled “Lessons from the Financial Crisis: Required Steps for Rebuilding the Investor Base and Future Sources of Liquidity.”

Talking about RMBS, the consensus is that the economics just aren’t working for issuers, let alone the other impediments to getting deals done these days. Current interest rates on jumbo mortgage loans are too low. Over the next six months, however, at least one panelist thinks spreads will come in and the dearth of alternative investment grade securities that are attractive to investors will help the RMBS sector.

One panelist said that too much leverage cracked the world economy and if institutions become so highly levered again, it will happen again. Insofar as regulations are concerned, many of us agree with him that it is irresponsibility that needs to be regulated.
 Continue Reading ABS 2010 Concludes With High Winds and Little Sun

Dechert attorneys kicked off ABS East by hosting a Day 1 cocktail party at the Fontainebleau that was well attended by our friends and clients.

Day 2 of ABS East is underway. The Monday opening panel– Restoring Confidence and Rebuilding the Industry: The Role of Securitization– drew a pretty full house.

The general consensus is that the regulatory bodies are in the way and will cause delay in the recovery of the securitization market. I won’t go so far as to claim it wasn’t broke and didn’t need some fixing, but it’s clear the fixing to come is going to take a while. Without definitive rules, potential issuers can not evaluate the cost to enter the market. If we had a more targeted response to our problems from Congress and the regulators we could avoid this delay.

On the resi front, clearly the GSEs have crowded out private issuance, which has been facilitated by Congress and the Fed. Whereas commercial real estate found a natural bottom, the feeling is that resi never did. And, as one panelist put it, "distressed loans continue to pose a lingering cloud preventing meaningful recovery." The question was posed as to why there was nothing much after Redwood in the resi space. Again, the GSEs are dominating that space. Conforming loan limits have never been higher and it’s increasingly more difficult to even qualify for a jumbo loan under current underwriting criteria. With CMBS, it’s possible to get a reasonable number of loans. RMBS requires many more loans and there’s competition for the best loans.Continue Reading Live From the ABS East

We’re looking forward to ABS East October 3-5. More than 2,200 attendees are expected to gather at the Fontainebleau Miami Beach to discuss current topics in securitization.  Hot topics this year include Lessons from the Financial Crisis, Restoring Confidence and Rebuilding the Industry, the Role of Securitization in Revitalizing the Economy, Assessing the Changing Face…

Two weeks ago, As the World Turns – a CBS soap opera documenting the lives of the inhabitants of the fictional town of Oakdale, Illinois – ended a 54 year run on daytime television. A shorter-tenured, but nonetheless compelling, local epic aired this week as Boston Properties announced that it had emerged from a bidding war to secure the Bay Colony Corporate Center – perhaps the premier office campus in New England – for a price of approximately $185 million (inclusive of assumed debt). As a real estate finance attorney in Boston, it’s a property I have fielded a lot of calls about. And, although missing the ubiquitous case of amnesia, it’s a story that would have made the good people of Oakdale proud.

The story of Bay Colony, corporate center, begins with its construction (on the former site of a pig farm along the Cambridge reservoir) at the height of the tech bubble. Located along Boston’s Route 128 tech corridor, the site comprises almost a million square feet of space on 58 acres, with 3,000 parking spaces to accommodate a rent roll that has listed a who’s who of Hub-area tech, venture capital and telecomm tenants. In fact, the sheer number of resident venture firms over the years – Advanced Technology Ventures, Charles River Ventures, Cedar Fund, Ironside Ventures, JAFCO Ventures, Longworth Venture Partners, Matrix Partners, Northbridge Venture Partners and Polaris Ventures Partners, to name a few – contributed to the property’s legendary status among entrepreneurs looking for investment dollars. A single workday onsite could yield three pitches.Continue Reading Distressed Debt: Boston Properties Next Up At Bay Colony