Entries by mcampbell

Beware of the Defeasance Gray Market

In 2016, CMBS 2.0+ loans have comprised nearly 40% of all defeasance activity. The defeasance of these newer vintage CMBS loans highlights hidden Borrower risk, in the area of defeasance portfolio structuring and pricing. Borrower exposure to securities portfolio markup grows exponentially with 2.0 loans due to a combination of longer maturities and alternative collateral options. Sloppy structuring and poor pricing equate to higher Borrower costs.

Defeasance Keeps Rising, Pace Slows

U.S. defeasance activity reached a post-crash high of $22.4 billion last year, but the rate of growth slowed sharply. The volume of commercial MBS loans defeased in 2015 was up by $1.5 billion, or 7%, from $20.9 billion the previous year, according to a draſt of an annual Moody’s report to be released today. That was a modest increase compared to jumps of $7.7 billion (58%) in 2014 and $7.3 billion (124%) in 2013.