As hotels and retailers struggle to pay their mortgages in the age of coronavirus, political consensus is emerging around the need for the federal government to prop up the commercial mortgage-backed securities market.
A bipartisan group of 100 Congressional representatives are expected to deliver a letter on June 23 to Treasury Secretary Steven Mnuchin and Fed Chairman Jerome Powell about the need for a lending facility to support commercial borrowers, according to the Wall Street Journal.
“Without a long-term relief plan in the face of an elongated crisis, CMBS borrowers could face a historic wave of foreclosures starting this fall, impacting local communities and destroying jobs for Americans across the country,” the letter reportedly says.
The pandemic has already sent more than $20 billion in CMBS debt to special loan servicers, who negotiate on behalf of investors who own the securities.
“We are losing money hand over fist. We lost millions of dollars,” said Carlos Rodriguez, who oversees the hotel investment and management companies Driftwood Capital and Driftwood Hospitality Management — which have a combined portfolio pegged at about $3 billion.
Over the last three months, 90 percent of CMBS loans in arrears have come from hotels and retailers, with the remainder being offices and multi-family buildings. In Chicago, more than 30 percent of hotels with CMBS loans missed their May mortgage payment.
Because CMBSs are packages of hundreds or thousands of commercial mortgages tied together as a single investment vehicle, the market is fairly rigid. Special loan servicers were never meant to renegotiate individual CMBS loans en masse. [WSJ] — Orion Jones