from Mike Smith
Managing Director, Capital Markets
After listening in on this morning’s Investing in Distressed Real Estate Mortgages session, it is apparent we all know how painfully broad and severe this recession has been on the real estate community. Yet, as markets seem to be stabilizing to some degree, it is surprising how few sales are actually taking place. Why is that? One major reason is the Federal government’s intervention with TARP and TALF —banks are predisposed to work out deals, thus leading to fewer transactions. In addition, with FAS 157 banks are allowed to carry loans on their balance sheet above market value which translates into less of an urgency to move loans out. And, while we are continuing to see increases in distressed properties, we are also seeing a dramatic increase in workouts.
What is the reality, where are the deals? Some are coming from:
- The FDIC and domestic banks that can afford to sell REO product,
- UCC foreclosures,
- Becoming lenders,
- Foreign banks: they’re not subject to the same accounting rules and can take back a loan – particularly if it is a balance sheet loan.
Deals are there. You have to know where to look. I’m off to my next session to find some…
- Mike
