South Beach played host to the 2018 CREFC January Conference last week, as roughly 1,800 of our best friends in the CRE lending and securitization industry assembled in Miami to reflect on another year gone by and to muse about what’s in store (or out of store, in the case of retail) for 2018. In keeping with tradition, Dechert’s reception at the SLS Hotel was a hotbed of schmoozing, deal talk and employment fair, as over 400 guests took a break from discussing the SEC to… watch the SEC. The excitement of the Alabama-Georgia national championship game was a welcomed excuse to extend the party well beyond the official ending time (a move that is quickly becoming an expected budget buster for this annual event).

As usual, Dechert was well represented at the conference. Dechert’s Laura Swihart served as conference co-chair, and Rick Jones moderated a riveting (ok, not so riveting) panel on “Floating Rate Loans: Circa 2018”.

Conference panelists and attendees were generally bullish, and why wouldn’t they be after a 2017 that saw $95.3 billion in U.S. CMBS issuance (not including the GSEs). For color, that number is up more than 25% from 2016. Not a bad way to usher in the risk retention era.
Continue Reading 2018 CREFC January Conference – Plateau or Status Quo?

I’d like everyone to go out and buy a copy of Professor Paul Mahoney’s slender new book, Wasting a Crisis – Why Securities Regulation Fails.  Paul is a brilliant guy.  Until this spring, he was the dean of the University of Virginia School of Law where he is the David and Mary Harrison Distinguished Professor of Law and the Arnold H. Leon Professor of Law, teaching securities laws.  This is a great book and an important read.  Paul argues cogently that:
Continue Reading Why Regulation Fails

Golden_turkey-01As is our tradition here at Crunched Credit, each year, about this time, we award our Golden Turkey Awards.  Once again, I must say that we are blessed, blessed with so many worthy candidates.  Our government, our courts, the regulatory estate both here and in Europe and around the world and the political class in general have once again vied with verve and imagination and breathtaking persistence to win a spot on our acclaimed list.  For those of you who we must disappoint, please accept our heartfelt apologies.  Yes, you screwed up and did stupid things breathtakingly well, just not as well as this year’s winners.
Continue Reading’s 6th Annual Golden Turkey Awards

A bill was recently introduced in the Senate that could result in the wind-down of Fannie Mae and Freddie Mac. Under the bi-partisan “Housing Finance Reform and Taxpayer Protection Act of 2013”, recently introduced by Senators Bob Corker (R-TN) and Mark Warner (D-VA), Fannie Mae and Freddie Mac would be replaced by a new agency, the Federal Mortgage Insurance Corporation (the “FMIC”), tasked with operating a Mortgage Insurance Fund to provide a limited, government-backed guarantee on qualifying, privately issued mortgaged-back securitizations.Continue Reading Dechert OnPoint: Residential Mortgage Securitization Update: GSE Reform Bill

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 Eminent Domain Proposals: Federal Housing Finance Agency Concerned

Earlier this month I was a panelist at the HOPE NOW REO Symposium in DC. The Symposium brought together residential mortgage loan servicers, community non-profits, private equity investors, government agencies and lenders to discuss the growing number of REO on the balance sheets of Fannie, Freddie and private mortgage lenders. I participated in a panel that focused on how private investors in REO might finance their investment in a pool of REO. One key financing option for investors will be the securitization of the rental income from the REO. Of course, in order to move this forward, we will need rating agency criteria.Continue Reading REO to Rental: Treating the Symptoms and Not the Disease

With little good news on the horizon for the U.S. residential housing market, public and private programs offering the sale of bulk residential REO is, in many circles, the topic for real estate investment.  The REO-to-Rental play is not without its risks – questions about the availability of financing and the viability of a structured exit remain as key questions.  Still, the strategy may present a favorable opportunity for banks and investors alike.Continue Reading Own-to-Rent: New Approach to Overflow REO Gaining Attention

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

Like a lot of homeowners this summer, my wife and I are looking to put new windows into our home.  We moved last October, leaving our downtown condo when the impending arrival of our second daughter promised to make things a little too tight.  A drafty winter and a number of windows that, well, just couldn’t be opened this spring demonstrated a need – and President Obama’s Energy Tax Credit cemented the deal. As I’ve learned, like almost everything associated with a new-old house, windows ain’t cheap – and the windows that qualify for the tax credit really ain’t cheap.  The increased cost takes 20 years (on average) to recoup based on the marginal energy savings (something to do with U-factors and Solar Heat Gain Coefficients according to Home Depot). But the government wouldn’t have to pay you to do it if it made good economic sense.Continue Reading Keeping PACE with Green Energy Movement

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 sight. In fact, as far as I can tell, there’s yet no plan in sight to ultimately come to an end in sight. Clearly, there are hard political questions about these enterprises which the political class have seen fit to dodge or kick down the road. Should they be private businesses? Conduits for subsidized housing? Both? We now know that both is the wrong answer, or at least not a very good answer. Someone said the GSEs are critical because the private markets have abandoned housing. But how can private markets compete with enterprises that have no need to make a profit, and whose debt is backstopped by the full faith and credit of the United States of America. Who’s going to compete in that market place? Moreover, you’d hope Washington is aware that many other advanced Western economies seem to do quite well without such quasi-public vehicles (not to mention without tax deductibility of mortgage payments, but that’s another story).Continue Reading The Intractible Problems of the GSEs