Dear John Thain

Big CMBS Loans Near Default; CMBX Soars, REITs Tank

My mistake, JPMCC 08-C2 *is* in Series 5. The source I went to wasn't authoritative and that's my error. It is, however, not necessary for my first point.

-DJT


On Nov 19 09:14 AM Dear John Thain wrote:

> Hi,
>
> First, I find nearly no evidence for your linkage between REIT stocks
> and two (technically three) loans in CMBS deals. I also don't even
> know how exposed CMBX Series 5 is to these loans since the deal you
> mention, JPMCC 08-C2, isn't in series 5.
>
> Second, you misunderstand DSCR since you erroneously cite it as a
> percentage when it is a multiple (the DSCR is 1.25x, not 1.25%).
>
>
> Third, you don't seem to understand the CMBS market when it comes
> to underwriting since over a 1.20x DSCR is considered standard and
> very safe.
>
> Lastly, it is entire meaningless to cite IO percentages of a CMBS
> pool. I'm not sure you know this, but loans backing CMBS deals, unlike
> similar residential deals, are generally 10/30's ... This means that
> they are 10 year loans that follow a 30 year amortization schedule
> and require a balloon payment (payment in full) after 10 years (unusual
> because the loan isn't fully amortizing).
>
> Please check your facts before drawing conclusions. Sorry..
>
> -DJT

Big CMBS Loans Near Default; CMBX Soars, REITs Tank

Hi,

First, I find nearly no evidence for your linkage between REIT stocks and two (technically three) loans in CMBS deals. I also don't even know how exposed CMBX Series 5 is to these loans since the deal you mention, JPMCC 08-C2, isn't in series 5.

Second, you misunderstand DSCR since you erroneously cite it as a percentage when it is a multiple (the DSCR is 1.25x, not 1.25%).

Third, you don't seem to understand the CMBS market when it comes to underwriting since over a 1.20x DSCR is considered standard and very safe.

Lastly, it is entire meaningless to cite IO percentages of a CMBS pool. I'm not sure you know this, but loans backing CMBS deals, unlike similar residential deals, are generally 10/30's ... This means that they are 10 year loans that follow a 30 year amortization schedule and require a balloon payment (payment in full) after 10 years (unusual because the loan isn't fully amortizing).

Please check your facts before drawing conclusions. Sorry..

-DJT

Disclosure from Financials? I Call B.S.

JasonC:

Actually, Merrill wasn't a big S.I.V. player--their writedowns were all from inventory they were unable to securitize when the market turned. As for Citi, the majority of their writedowns have come form inventory in their C.D.O. business, a vast minority of the writedowns were from S.I.V.'s. The issue with S.I.V.'s was, first and foremost, one of capital and consolidation.

-DJT