10A — March 16 - 29, 2012 — Financial Digest — Mid Atlantic Real Estate Journal



By: Bruce J. Coin, Bruce Coin Consulting, Inc. The Current Commercial Mortgage Market


he big commercial real estate news was the February 21st bank-

It is a strategic move that could potentially have a greater impact on the commercial mort- gage market than the obvious addition of Grubb and Ellis’ one hundred or so commercial real estate offices to BGC’s overall group. Cantor Fitzgerald, since only really starting its CMBS plat- form in 2010, has now become one of the more highly visible originators of CMBS II product. Using the Grubb and Ellis office network as its own pipeline, Cantor, if so inclined, could create its own, virtually unlim- ited, source of locally generated and underwritten CMBS loan

applications dramatically en- hancing investor interest and confidence. Such a controlled feeder structure employing prudent loan underwriting and with oversight and checks and balances could lead to their pos- sibly dominating the industry. Time will tell if they move in that direction. How to unwind Fannie Mae and Freddie Mac has been on regulator’s minds for close to two years. On Tuesday Febru- ary 21st, the Federal Housing FinanceAgency (FHFA), created by The Housing and Economic RecoveryAct of 2008, sent a new strategic reform plan for that to

Congress. Their plan calls for creating a new infrastructure for the secondary mortgage market to reduce the scope of Fannie’s and Freddie’s market share while simplifying and shrinking their operations. They commented that Fan- nie’s and Freddie’s ongoing ability to provide a stable liquid flow of mortgage backed securi- ties to investors is essential to stabilizing house prices and ensuring stability in the value of approximately $3.9 trillion of currently outstanding MBS. During their conservatorship, Fannie’s and Freddie’s multi- family market share has grown

but they do not dominate that market as they do the single family market. FHFA’s pro- posal pointed out that the mul- tifamily platforms, unlike the single family operations, share underwriting risk either with their loan originators (Fannie’s DUS program) or by issuing classes of securities (Freddie) where investors share the risk. The proposal went on to say that Fannie’s and Freddie’s multifamily businesses have “weathered the housing crisis”, generated positive cash flow and that their multifamily busi- nesses are not subject to reform efforts. The FHFA proposal does require them to undertake a market analysis of the viability of their multifamily operations without government guarantees and the likely prospect of their operating on a stand-alone basis after attracting private capital. For a variety of reasons, the FHFA indicated that contract- ing Fannie’s and Freddie’s commercial multifamily busi- nesses should be approached differently (than their single family business) and may be accomplished using a more di- rect method. In the interim, it appears as if “business as usual” will continue with Fannie’s and Freddie’s multifamily lending operations and that’s good news for apartment borrowers. In other news: •Consistent with past prom- ises of more “transparency” the minutes of the FOMC’s Febru- ary meeting included a tre- mendous amount of additional information and insight into board members thinking. •The Financial Accounting Standards Board (FASB) contin- ues to analyze its initial recom- mendation that long term real property leases be reflected on company balance sheets as long term liabilities. How that plays out can have a major impact on tenants especially chain-anchor retailers. It can also impact the benefit of doing a purchase- leaseback transaction to effect off balance sheet financing. Despite being recently bom- barded by gasoline price in- creases, there is no question that the economy is improving. All signs point to this national election year as being better for the commercial real estate and mortgage markets. Stay tuned. Bruce Coin is director of Bruce Coin Consulting, Inc. ■

ruptcy filing by Grubb and Ellis and si- multaneous a n n o u n c e - me n t t h a t it was being acquired by BGC Pa r t - n e r s , I n c .

Bruce Coin

(“BGC”). BGC is a global finan- cial services firm that last year acquired the Newmark Knight Frank organization. BGC’s larg- est shareholder is the Cantor Fitzgerald brokerage firm.

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