Lawmakers ask Fed to give some CMBS borrowers relief - WSJ

• A bipartisan group of more than 100 members of Congress are asking the Federal Reserve and the Treasury Department to set up a lending facility for businesses struggling to pay mortgages on hotels, shopping malls, and office buildings.
• Many of the businesses that borrow money in the ~$550B market for commercial mortgage-backed securities haven't been able to negotiate debt relief during the pandemic, leading some to worry that they could lose their properties to foreclosure, the Wall Street Journal reports.
• “Without a long-term relief plan in the face of an elongated crisis, CMBS borrowers could face a historic wave of foreclosures starting this fall, impacting local communities and destroying jobs for Americans across the country,” the lawmakers said in a letter due to be delivered on Tuesday.
• The rigid structure of the CMBS market makes it more difficult for borrowers to get temporary payment relief, unlike homeowners, which have been able to pause mortgage payments for as much as a year.
• CMBS borrowers seeking to pause their payments must work through "special servicers," which are hired to negotiate on behalf of the bondholders that own the loans.
• Hotel owners who have contacted their special servicers say they have encountered silence, long waiting periods, and demands for cash upfront, the WSJ said. Meanwhile, hotel occupancies are drastically lower as a result of the pandemic.
• Some interested tickers: STWD, BXMT, CLNC, LADR, HASI, CLNY

Comments

[Kurt Licherovsky]

If there's no relief, STWD is sitting on 900 million in CASH and a 2 Billion dollar unused revolver to acquire property on the cheap. It is still too early to know. My guess is the FED will set up the lending facility.

[vitullijoe]

What are the prospects of something like this happening?

[VicariousDLMKR]

@[e-mail] Very high Considering that Powell has reassured markets that the fed will do anything and everything necessary to maintain markets.

[vitullijoe]

thanks

[shine4u]

In Germany they suspended mark to market rules 6 months to avoid margin calls.

[USC Heisman winner]

That is an excellent suspension.
Let's hope they do not make mark to market the law for us individual investors.
That would be devastating to buy and hold guys like myself!!

[CincinnatiRick]

@USC Heisman winner How would the valuation of loan collateral, whatever standard were utilized, "devastate" individual investors? This suspension has nothing whatsoever to do with taxation.

[USC Heisman winner]

My comments were solely based on speculation that has been floated by Elizabeth Warren during the primaries to raise taxes by mark to market assets on individuals stock & bonds.
Sorry for the confusion and political comment but I HATE the idea of market to market on individuals investments.

[linkdonald]

Some of the facilities cited are simply in a "good money after bad" situation. Malls are in trouble but it is a structural thing. Not related to COVID but changing methods and operations. Also office buildings as experience has demonstrated the practicality of more working from home. One size does not fit all and the desire for politicians to simply demonstrate movement on a problem often is counter productive.

[Colorado Wealth Management Fund]

A borrowing facility should've been set up for residential mortgages, but Mark Calabria (head of the FHFA) prevailed. He was precisely wrong about the great financial crisis. He was rewarded for his wrongness by being appointed to a job. He has since performed poorly.

Shocker.

Thankfully, he shouldn't be involved here.

[Hockeyzan]

Yea Calabria should be fired. Completely incompetent

[malaparte]

Any chance you could repost your article on Calabra. Was one of your better ones

[Robert Rio]

World's smallest violin

[Sundance Utah]

@Robert Rio
Let these companies fail in a normal recession, not a government mandated lockdown based on pure hysteria and bad science.

[Matt1164]

Good

[Elle Investments]

See our study/proposal where we have been arguing to declare Time as Suspended during the crisis.
here lucadona.com/...