Mortgage Musings

The industry has long anticipated the wave of refinancings that starts this year. But the CMBS market has recovered to such an extent that there is no longer a sense of dread. The one-time concern about too many underwater loans has been replaced by a confidence that even if some refinancings require additional cash, they will nonetheless close successfully.

After all, while CMBS issuance is not nearly what it was in 2007, it has climbed steadily since its nadir in 2009, reaching $90 billion last year, according to the CRE Finance Council. That was nearly equal to the amount issued in 2004, the year in which deals up for refinancing last year had been originated. The three years that followed were the big ones, of course, with unprecedented, virtually unfettered volume. With those years seeing $168 billion, $203 billion and $230 billion in originations, respectively, covering them as they expire will be no small feat. But the market’s health continues to improve, as evidenced by delinquencies’ continued fall, both overall and within each major property sector, according to Standard & Poor’s data.

Indeed, respondents to this year’s CPE-MHN Top Mortgage Banks and Brokerage Firms survey expressed expectations of increased volume this year, with more than a third anticipating growth above 20 percent. And those participating in this year’s

Mortgage Bankers Roundtable likewise predicted greater volume not just for their own firms but for the industry at large.

There are, of course, a few wild cards that could impact this year’s production. One is the potential for short-term interest rates to rise significantly and at odds with long-term rates. But given that rates are so low to begin with and that the general expectation is for a moderate rise, the outlook is more favorable than not. Of greater concern is the volatility around the world, including commencement of quantitative easing and concerns about the Greek and Spanish economies in Europe and the slowdown in China and Japan. It is a global economy, after all, and although the U.S. continues to attract foreign money as a safe haven, it can also be negatively impacted by uncertainty elsewhere.
Stars in Alignment

For now, though, the U.S. real estate finance sector is on an upward path, as perhaps evidenced by the number of financiers that rank among this year’s CPE Stars to Watch. While many of these are more traditional lenders (as well as investors, brokers, developers and managers), a new addition to the list are the co-founders of Fundrise, a real estate-specific crowdfunding business started by two developers. I think you’ll find their experiences and those of our other rising stars to be interesting reading.

Suzann D. Silverman, Editorial Director