CMBS Market Returns and Fed purchases hold yields down for ...

Good news for MBS investors this week will trickle down into CMBS and continue upward pressure on the value of SBA pools and guarantees in the secondary market.? Here?s what the Fed?s Open Market Committee said:

?If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases? until such improvement is achieved in a context of price stability?.The Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economy strengthens.?

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In the commercial mortgage backed securities world, higher prices on residential MBS and agencies mean higher prices for CMBS as the commercial MBS market improves.? True, delinquencies in existing MBS are over 10 percent, with defaults concentrated in the loans originated in 2007.? But rock bottom yields on 10 year Treasuries and other assets encourage risk ? and wouldn?t you know it, Wall Street is responding with looser underwriting standards and higher sales.

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Goldman Sachs, Citigroup and Bank of America sold $1.25 billion of the CMBS last week.? The market is Back! ?Wells Fargo & Co., and Deutsche Bank AG and others slated to sell $2.34 billion in CMBS this week.? The underwriting for new loans going in to commercial mortgage securities was, through the end of last year, quite stringent.? But the credit reins ae loosening.

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Consider if you will the ?$100 million first ?included in last week?s CMBS bonds on an office tower in Manhattan that uses projected rents for vacant space to calculate the building?s income.? Do you think you could get a loan on your building ? or on your BEST clients? building ? using PROJECTED rents?? Hardly. Not in the credit union world or in the community banking world or the life company world.? And SBA underwrites ion real EBITDA, almost always has. But take a hundred million dollar request to Citi or Goldman?s conduit desks and demand for the bonds pulls the loans right through underwriting.? If today?s income does not work, use tomorrow?s.?? Good for our business, good for borrowers.? But for the country?

With Wall Street reentering the market and commercial and community banks battling for real estate secured assets in improving markts,? now is a great time to borrow.? Credit union rates for commercial deals ? incuding senior SBA 504 ? remain mid FOURS.? And credit union loans remain free of costly prepay penalties common with CMBS, Libor swaps and life company loans. ? Check out: ?Centennial Lending Commercial Rates and Programs September 2012 Web Enabled

Source: http://www.sbafinancenews.com/cmbs-market-returns-and-fed-purchases-hold-yields-down-for-commercial-borrowers/

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