Freedoms Truth

CMBS Delinquencies Rise: Should the Government Step In?

"Until recently, this rate of delinquencies has had limited impact on the $800 billion commercial mortgage backed security market (CMBS)."

Either you are thinking of some different impact than I am or I dont buy this AT ALL. It contradicts your spread chart as obviously the credit markets and CMBS conduit markets have dried up and spreads are super-wide. Now in fact this has been going on since last year. I was getting conduit loan quotes 18 months ago of 185bps for 80% LTV loans and now such loans do not exist. They havent since fall 2007. What it means for commercial real-estate buyers is lower LTV loans and go to banks for loans. I dont doubt that delinquencies and foreclosures will rise, especially in retail. But it surely looks like this rates of foreclosure are more than priced in, when debt is at 75% for an average 70%, you are buying debt at little more than half the asset value, and you are buying debtors in a different level from homebuyers. Since commercial RE didnt have much of a bubble to start with, you really have priced in most of the downside already.

It also is wrong to imagine that Government intervention is needed, useful or helpful. Why? To prop up CBMS assets? To revive a conduit market that has been dormant since 2007 anyway? Again, why? Govt cant get cap rates down without helping the 'risk economy'. If Government wanted to do some good, it should allow for accelerated depreciation and lower cap gains tax rates. That would revive asset values at near zero long-term cost to Government. Such thinking is alien to the socialists running the Federal Govt right now. The only reason to buy CBMS paper right now by the Govt that I can think of is the fact that it is probably undervalued given the asset numbers I mention above.