Trouble with TALF?
According to analysis compiled by REEcon, the Fed anticipates an increase in securitization and a corresponding increase in loan origination activity, which in turn will enhance lenders' capacity to refinance maturing mortgages, originate new mortgages and support the specific financing needs of investors seeking to acquire properties in distressed sales. More simply, "it's drawing in private capital from a variety of sectors which theoretically bring in all this money that's sitting on the sidelines to purchase these securities and start lending again," Clifton Rodgers, SVP at industry group the Real Estate Roundtable, tells GlobeSt.com.
Pleas for increased liquidity have been coming in loud and clear from the commercial real estate community for several months now as banks, hard hit by the economic downturn, have virtually frozen lending. According to the Fed's Senior Loan Officer Opinion Survey for April, 66% of domestic banks reported tightening commercial real estate lending standards in the first calendar quarter.
Dimming hopes of future relaxing of standards is a growing lack of faith by banks in the quality of commercial mortgage quality. Standard & Poor's recently placed $100 billion of CMBS issued from 2004 to 2008 on negative watch. Fitch Ratings followed suit with $18 billion of CMBS issued between 2006 and 2008. "We have numbers showing that more than 90% of domestic banks think the commercial mortgage quality is going to deteriorate, with 26% of those saying it's going to deteriorate substantially," says Chandan.
Raising the cash flow alarm volume higher, the RER says that over the next few years, the commercial real estate industry faces a liquidity crisis of mammoth proportions. Of the $6.7 trillion of assets compromising the greater commercial real estate market, around $3.5 trillion is debt. Around $10.7 billion worth of CMBS loans are currently delinquent or have defaulted, according to data from the Commercial Mortgage Securities Assoc.
Leave a comment