by John Richard, Managing Director, Investcap Advisors LLC
Borrowers may feel the day of reckoning has been delayed, but this is likely less of a positive for which CMBS market participants are giving it credit. Servicers are not going to be sitting idle with problems over the next twelve months given the maturing loan pipeline and increasing delinquency rate. This argues strongly against taking any decisive action today on a currently performing mortgage that is not due to mature until 2012. There is also the issue of how certain bond investors will feel given pre-emptive modifications. Actions taken ahead of perceived and expected problems will certainly have a dramatic impact on cash flows into a CMBS pool. Not everyone benefits in this scenario. Apart from the issues with bond investors and an increased workload at the servicer level, the prevailing wisdom acknowledges that the underwriting excesses of the past need to work their way out of the system. Modifications in many instances simply mute the symptoms but do not cure the illness.
Posts
