Investor's Business Daily (01/11/08) P. A8; Gose, Joe
For most of the past 10 years or so, bundling residential or commercial real estate loans, slicing them into bonds and then selling them to private and institutional investors--a process known as securitization--worked splendidly. Now, thanks to the subprime mortgage mess and other mostly economic factors, investors looking to spend substantially less for loan bundles due to the higher perceived risk are clashing with originators that still want a big payday. Growing troubles that started last summer caused residential mortgage-backed securities (RMBS) issues to plunge 67 percent from the second to third quarter and commercial mortgage-backed securities (CMBS) issues to plummet 69 percent from the third quarter to the fourth. With Capitol Hill lawmakers debating bankruptcy legislation that could give judges the power to essentially rewrite home loans, the future of the securitization market could be in further jeopardy. At the same time, commercial property owners with maturing loans are likely to encounter tougher terms when refinancing in the coming months.
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