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Turmoil Continues in the CMBS Market

Commercial real estate loans are making Wall Street headlines again. Joint financing options are becoming increasingly abundant for financial firms struggling to handle the fall out from recent volatility in the commercial mortgage-backed securities market.


During the summer, yields rose steadily, increasing the need for investor protection measures and, accordingly, limiting loan margins for previously originated loans. The buzz on Wall Street indicates growing concern over the future of the CMBS sector, due to a possible cut back in lending as economic issues hinder investment in the market.

""ING Investment Management's"":http://www.inginvestment.com/US/Institutional/ chief investment officer, Christine Hurtsellers, noted the problem during a recent


interview, saying,""It's very hard for these people to hedge because they have to build up sizeable pipelines. They will get more creative to source real estate lending from other places, so they don't have to commit as much capital.""

Elsewhere in the CMBS marketplace, ""Barclays Capital"":http://www.barcap.com/ just announced a partnership with ""FundCore Finance Group"":http://www.fundcorefinance.com/ to conduct CMBS loans jointly, which reflects the sentiments expressed by Hurtsellser.

Prior to the changes in the CMBS space, banks utilized a much more controlled, exclusive process for mortgage lending that didn't include collaborating with companies outside the financial institution.

Major lay offs at entities like ""Bank of America Corp."":https://www.bankofamerica.com/ are also set to hinder growth in the CMBS sector, and bond dealers in the marketplace cite shrinking margins as the other critical factor stunting CMBS deals.
One anonymous source spoke to the _Wall Street Journal_, stating, ""I'm not sure Wall Street is patient with businesses that aren't currently making a lot of money.""

A late-August report from _Bloomberg_ indicated that banks were already gearing up to unload nearly $5 billion in CMBS bonds as the credit markets declined.

Sales initiatives from Goldman Sachs Group Inc, Citigroup Inc., BAC, Wells Fargo & Co., JPMorgan Chase & Co., and Royal Bank of Scotland Group Plc are set to move forward throughout the fall, despite Standard & Poor's refusal to rate the transactions due to possible hidden risks.

About Author: Abby Gregory


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