New Financial Stability Plan Could Restart Trading in Frozen CMBS Market

By Anuradha Kher, Online News EditorWashington, D.C.–The National Multi Housing Council (NMHC) and National Apartment Association (NAA) commended the Obama Administration for including commercial real estate in the Financial Stability Plan that was unveiled yesterday.The four-part plan to unlock credit markets and strengthen the still-beleaguered U.S. financial system includes expanding the Term Asset-Backed Securities Loan Facility (TALF) to up to $1 trillion and to allocate part of the program to purchase AAA-rated commercial mortgage-backed securities (CMBS). “We commend the administration for recognizing the importance of including commercial real estate in the Financial Stability Plan,” says NMHC President Doug Bibby. “Most of the attention paid to the mortgage crisis has been on the single-family finance system, but the apartment sector and other commercial real estate sectors, like so many other industries, have become collateral victims of the global financial meltdown.””We believe this will restore investor confidence, restart trading in the frozen CMBS market and establish a market-clearing price for a variety of real estate assets, including commercial and multifamily mortgages.””Today’s action is critical because unless liquidity is restored to the commercial real estate sector, we face a serious risk of waves of defaults and bankruptcies of otherwise performing apartment properties,” adds Bibby. John A. Courson, president and CEO of the Mortgage Bankers Association (MBA) also expressed agreement with the new financial stability plan.   “Today’s announcement represents a significant step forward in the effort to restore confidence in our financial institutions, stabilize the credit and housing markets and address some of the systemic problems currently plaguing our national economy,” says Courson.  “Secretary Geithner also unveiled a multi-pronged approach to restart the stalled credit markets and encourage financial institutions to start lending again. We are pleased, particularly with the expansion of the TALF to specifically include commercial mortgage-backed securities. We hope the program will contain support for both new and existing assets including private label residential mortgage-backed securities. The market for new private label RMBS and CMBS has essentially disappeared, and this will hopefully help spur lending for commercial and multifamily projects,” Courson says.