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12.7.16: … But a Busy CMBS Market Now Leaves a Hole for First-Quarter 2017

admin — Wed, 07 Dec 2016 00:00:00 +0000

CMBS issuance for the beginning of 2017 looks very weak because CMBS issuers are clearing out loan inventory this month in anticipation of risk-retention rules effective December 24. According to a review by Commercial Mortgage Alert (CMA), only seven transactions totaling $6.4 billion are in the pipeline for January and February. The $3.2-billion monthly average would be well below the 2016 level of $6.3 billion and 2015’s $8.4 billion.

The slowdown has been widely blamed on the unknown consequences of the risk-retention rules set to become effective on December 24. Rather than wait and see, most CMBS players elected to move out their inventory under the old rules. With CMBS pricing stable and loans on the books priced at relatively healthy profit levels, it was not a difficult decision to simply move the deals out now.

To be fair, a number of larger CMBS players have already rolled out risk-retention compliant deals with success, so the uncertainty surrounding the rules is less. However, it is still unclear which method of compliance — the “horizontal,” “vertical,” or combination of horizontal and vertical approaches — will become market standard. Without knowing, most CMBS originators are not aggressively pursuing new loans until the market standard for risk retention is determined, which will result in a slow start in 2017 for CMBS loans.

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9.18.15: Federal Reserve Leaves Rates Unchanged

admin — Fri, 18 Sep 2015 00:00:00 +0000

The Federal Reserve left short-term interest rates unchanged after weeks of market-churning debate, putting off an historic move to end an era of ultra-cheap credit amid worries about weak growth overseas. While Central Bank officials don’t believe recent global economic and market turbulence will throw the U.S. economy off track, they want to be sure before they push rates higher.

“In light of the developments that we have seen and the impacts on financial markets, we want to take a little bit more time to evaluate the likely impacts on the United States,” Fed Chairwoman Janet Yellen said Thursday at a press conference following a two-day policy meeting.

The decision left uncertain for a while longer just when the Fed would raise its benchmark rate, which has been near zero since December 2008. Most of the policy makers at the meeting, 13 of 17, indicated they still expect to move this year, but that was down from the 15 who held that view in June. The Central Bank has two more scheduled policy meetings this year, in late October and mid-December.

“The 10-year swap rate, a CMBS conduit loan index that affects interest rates, reacted positively on the news,” commented Michael D. Sneden, Executive Vice President at ValueXpress. “The rate fell from 2.30% to 2.17% on the news and declined further to 2.12% on Friday, September 15, which is significant, reducing rates on prospective loans by 18 basis points.”

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