The mortgage-backed securities market is showing some signs of improvement, both in CMBS and RMBS, after coming to a halt at the beginning of the economic crisis in 2008. In spite of the recovery, the consensus among analysts is that they will never achieve their previous levels.
Apryl Motley took a close look at this issue for the current edition of the Appraisal Institute’s Valuation magazine.
At its peak in 2007, the CMBS market was at $270 billion, according to Mike Flood, vice president, policy and research, for the CRE Finance Council in Washington, D.C. It fell to $2 billion in 2009, recovered to $12 billion in 2010 and ended this year at $30 billion, with approximately $50 billion expected next year. While that marks some recovery, it’s still a long way from the peak realized less than five years ago.
What’s being called CMBS 2.0 and RMBS 2.0 will be highlighted by more due diligence on the part of all market participants, increased federal government regulation and greater need for valuation expertise.
Everett Allen Greer, managing member of Greer Advisors, believes that there is a global fear of debt and default and that those concerns need to be resolved before an MBS recovery is possible. He added that distrust of ratings agencies and compliance with Dodd-Frank also play key roles. Barbara Duka, managing director of Standard & Poor’s U.S. CMBS ratings group, said that one of S&P’s goals is to increase transparency.
While this uncertainty clearly poses challenges, it also creates enhanced opportunities for appraisers; Greer noted a growing need for more frequent valuations across entire loan portfolios.
Read the article in the Fourth Quarter 2011 issue of Valuation magazine.
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