The CRE Industry Reacts to Proposed CMBS Rescue Fund

Article originally posted on National Real Estate Investor on July 30, 2020

capitol building money

Congressional Representatives Van Taylor (R-Texas), Al Lawson (D-Fla.), and Andy Barr (R-Ky.) have officially introduced into Congress H.R.7809, which would direct the Secretary of the Treasury to stablish a HOPE Preferred Equity Facility to guarantee certain financial investments of commercial borrowers affected by COVID-19, and for other purposes. The proposed legislation has been referred to the House Committee on Financial Services for review. The bill was sponsored by Taylor and co-sponsored by Lawson and Barr.

According to reporting from the Wall Street Journal, “the bill would set up a government-backed funding vehicle that businesses could tap to stay current on their mortgages. It is meant in particular to help those who borrowed in the $550 billion market for mortgages that are packaged into bonds and sold to Wall Street.”

Additionally, “banks would extend money to help these borrowers and the facility would provide a Treasury Department guarantee that banks are repaid. The funding would come from a $454 billion pot set aside for distressed businesses in the earlier stimulus bill,” according to the WSJ’s reporting.

The National Law Review published details on a draft version of the bill on July 12. It spells out criteria for how borrower eligibity would be determined as well as how financial instituions could be reimbursed by the Federal Reserve when participating.

The bill comes at a time when delinquencies on CMBS loans have rapidly mounted and borrowers have found it challenging to navigate their relief options from lenders. The hotel and retail industries, crippled by COVID-19 shutdowns, have been particularly affected. Delinquency rates on CMBS loans secured by hospitality and retail properties soared to 24.3 percent and 18.07 percent, respectively, according to the most recent data from Trepp.

Find Complete Article Here: