Into the Looking Glass (Sunday committee meetings): 2009 MBA-CREF Convention - Topics of Interest
(This is a little out of order, in that in our Monday blog we covered in "real time" the Opening Session and today [Tuesday] we cover the Sunday committee meetings. But then this is a blog, which is a bit different any way. So, here is our summary of the Sunday committee meetings.)
Although separate servicing and origination meetings were on the agenda, last minute plans combined the groups into one meeting; perhaps because the silence would have been deafening, had the originations group held their own meeting.
The meeting was candid and sobering without being alarmist, covering a wide range of topics, including:
- CMBS servicers generally believe that annual delinquency estimates for 2009 have increased from 7.5B (estimate in Nov. 2008) to 15B currently and that real estate values will decrease further from 2008 by an additional 10% to 15%.
- The life industry is having a hard time articulating 2009 allocations for "new" originations because they are generally limited by ratios of in-force mortgages to total assets, and they are very unsure how their mortgage and bond portfolios will pay-off, refinance or be extended, either internally or through 3rd parties, all having significant effects on funds available later in the annual cycle (3rd and 4th Q)
- Risk-based Capital Allocation requirements are hurting servicing outcomes for the life companies
- Discussion of maturity default risk and it's timing (late 09, but significantly more in 2010 and 2011)
- Modifications (through the use of extensions) instead of foreclosure in a capital frozen environment seems to be the way to go
- Emphasis on "capturing the cash", i.e. cash management as the cornerstone of workouts
- Special servicer concerns over liability under the PSA or as fiduciary for actions taken or directed by the B piece buyer as the controlling class
- Much gripping about mark-to-market and the need for clarifying guidance from the SEC.
The sun came out today,
but like the fickle markets,
didn't stay.
