(DOWNLOAD) "Going from Mark-To-Market to Mark-To-Make-Believe (Insider's Perspective)" by Real Estate Issues ~ Book PDF Kindle ePub Free
eBook details
- Title: Going from Mark-To-Market to Mark-To-Make-Believe (Insider's Perspective)
- Author : Real Estate Issues
- Release Date : January 22, 2009
- Genre: Business & Personal Finance,Books,Finance,
- Pages : * pages
- Size : 58 KB
Description
HAVE WE GONE FROM "MARK-TO-MARKET" to "mark-to make-believe?" Financial regulators consisting of representatives of the Federal Reserve, the Federal Deposit Insurance Corporation, the Comptroller of the Currency, and others released their guidelines, "Policy Statement on Prudent Commercial Real Estate Loan Workouts," in late October 2009. The purposes of the statement were to provide transparency and consistency to commercial real estate workout transactions and not curtail the availability of credit to sound borrowers. While the regulators' intentions are honorable, the policies may provide the opposite effect--lack of transparency and consistency and the lack of credit to sound borrowers. In the early part of 2009, a tremendous amount of distressed commercial real estate existed. Many loans had balances that exceeded their underlying asset value. This dilemma continued throughout the year with substantial defaults and increasing amounts of distressed real estate. Later in the year, Real Capital Analytics, Inc. estimated that distressed properties exceeded $150 billion and Moody's Investors Service noted that commercial property values dropped 43 percent from their October 2007 peak and were continuing to drop. A joint study by PricewaterhouseCoopers and Urban Land Institute indicated that there was little, if any, chance of recovery for many of these properties. Further, they reported, an additional pool of distressed properties existed just in commercial mortgage-backed securities, or CMBS--$250 to $300 billion a year that matured or rolled over through 2015. This was just one of many financial sources having difficulties In the case of CMBS alone, previous underwriting would not hold water due to higher loan to values, deteriorating net operating income and rising capitalization rates. As a result, a huge amount of properties were at risk. Obtaining financing upon the expiration of their loan terms was highly questionable.
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