TGIF…Friday the 13th for those of you with Triskaidekaphobia
Expect the Unexpected
‘Expect the Unexpected’…that was the unoffical theme of the CRE Finance Council’s 2017 Annual Conference in Miami. Situs personnel in attendance report the theme came up time and time again in the conference.
The Commercial Observer reports on the event this way:
“The orange swan has arrived and things have changed,” announced one participant in the Industry Leaders Roundtable at CRE Finance Council’s 2017 annual conference in Miami. He was, of course, referring to our president-elect, who was fodder for some lively chatter as day two of the conference began.
The lenders jumped in to opine on whether having a businessman in the White House would have a positive or negative impact on the commercial real estate market. But, the jury was firmly out. While some lenders described feeling a “collective optimism,” about Donald Trump’s taking the helm in the oval office, others weren’t quite as convinced.
Interestingly, one lender told the audience that he had taken the time to research how many commercial mortgage-backed securities loans list Trump as the borrower—and found the number to be more than a dozen. So, one thing is for sure, the individual said: “It’s pretty unusual to have a CMBS borrower as president.” (Conference rules prohibit members of the press from directly quoting panelists.)
“He’s a real estate guy, so we can guess what he is going to do. But any disruption presents opportunity,” another executive noted.
While there was general optimistic view of a changing regulatory environment from conference participants, many do not believe the new administration will have an urgency to review all the rules and regs that are holding back CRE, instead they believe the main priorities of the administration are expected to be, in order of importance:
Healthcare Reform
Tax Reform
Finance regulations, including changes to Fannie Mae and Freddie Mac
Situs Executive Managing Director Warren Friend, participating in the ‘Industry Leaders Roundtable Panel’ made chicken soup out of chicken salad, noting that rising rates will actually solve a number of problems, such as those for retirement funds. At the same time, he said, it improves banks revenues which will make them more inclined to increase lending. Another panelist noted one of the biggest surprises has been the resilience of the CMBS market.
As the Commercial Observer reports, chatter gradually returned to President-elect Trump as the panel drew to a close. “In the three months since the election, the only thing we know is that there’s a lot we don’t know. And maybe that Twitter is difficult to pry away from him,” mused one lender. “Our expectation for the next 4 to 8 years should be for really unexpected events to happen repeatedly,” agreed another.
Expect the unexpected.
States to Feds: Back Off on New Fintech Bank Plan
A long-running conflict between states and the federal government over how to regulate online banking is coming to a head.
The U.S. Office of the Comptroller of the Currency will soon begin considering applications by financial-technology companies for national banking charters as a way to promote competition while both streamlining and strengthening regulation.
That could bring more fintech firms—which offer online loans, smartphone payments and other services—under the direct supervision of the federal government, giving them the power to make loans or transfer money without state approval. Under federal law, banks with national charters don’t have to abide by some state lending rules, a practice known as “pre-emption.”
In response, banking regulators in some of the largest states say they plan to aggressively challenge Washington’s power to override them, arguing that states have been much tougher on “fintech” firms than their federal peers—and warning.
read more: Wall St Journal
Shadow Banks Stretch Into Loans
Regulators are notorious for falling behind the financial industry, cracking down on risk in one area only to watch it move swiftly beyond their reach.This phenomenon has rearranged the competitive landscape in the nearly $1 trillion market for U.S. leveraged loans.
This week, Bloomberg News highlighted how private-equity firms have been winning a growing number of assignments to help companies secure risky loans from investors.
Indeed, the likes of KKR, Ares Capital and Angelo Gordon have climbed the league tables, managing loan syndications for companies such as Ancestry.com and Ultimate Fighting Championship.
But they’re not alone. Many other smaller firms, including regional banks, have also grabbed leveraged-loan banking business from Wall Street in the past few years as federal regulators crack down on lending practices at the biggest banks.
read more: Bloomberg
Brexit: Britain’s Finance Industry Scales Back EU Market Access Demands
Britain’s finance industry has reluctantly given up on efforts to keep full access to the European Union after Brexit and is pushing instead for a more limited trade deal that would potentially exclude some financial products.
Banks, insurers and asset managers have concluded there is no realistic chance of maintaining full ‘passporting rights’ after Brexit that would allow them to sell all their services across the 28-nation bloc from Britain.
TheCityUK, the country’s most powerful financial lobby group, instead called on Thursday for limited market access for some finance sectors based on a pact in which Britain and the EU would accept each other’s rules.
Such an “equivalence” arrangement would keep the door open for cross-border trading of stocks and bonds, and sales of certain other products.
TheCityUK document is the first attempt to condense the industry’s priorities after months of conflicting lobbying and comes just two months before Britain plans EU divorce talks.
“I am confident that this represents in broad shape the key priorities for the industry,” TheCityUK Chief Executive Officer Miles Celic told Reuters.
The future of London as Europe’s financial centre is one of the biggest issues in Brexit talks because it is Britain’s largest export sector and biggest source of corporate tax revenue.
read more: Reuters
Germany Rising
The German economy expanded at the fastest pace in five years in 2016 and the growth momentum is expected to continue this year as rising private and state spending help Germany cement its position as the locomotive of the euro zone.
Europe’s largest economy expanded by 1.9 percent last year, a preliminary estimate from the Federal Statistics Office showed on Thursday, as an environment of low interest rates and a record influx of refugees fuel household and state spending.
These factors have compensated for weakening exports, long the pillar of an economy where manufacturing makes up about a fourth of output.
read more: Retuers
Mortgages as Political Footballs
While many in the mortgage and real estate industries are praising the Obama administration decision to lower FHA mortgage insurance premiums, the chairman of the House Financial Services Committee isn’t happy about the move.
The FHA is reducing its premiums from 0.85% to 0.60%. Congressman Jeb Hensarling (R-Texas) said that the move was “cynical” and put taxpayers at risk.
“It seems the Obama administration’s parting gift to hardworking taxpayers is to put them at greater risk of footing the bill for yet another bailout,” Hensarling said. “Just three years ago the taxpayers had to spend $1.7 billion to bail out the FHA. Lowering premiums to below market rates now only puts the FHA in a more precarious financial condition.”
Mortgages Don’t Share in Trump-Election Bounce
Demand for mortgages fell substantially during the last three months of 2016 after rates spiked by more than half a percentage point in the wake of Donald Trump’s election. Total mortgage applications dropped 21% from the third quarter, led by demand for refinances which fell 31%, according to Mortgage Bankers Association data.
Mortgage application volume increased 5.8 percent on a seasonally adjusted basis last week from the previous week, but application volume is 25 percent below year-ago levels.
Applications to refinance a home loan, rose 4 percent for the week, but are 32 percent lower from the same week a year ago.
“Ten-year Treasury yields fell the week following New Year’s Day as markets continue to adjust their expectations about the incoming administration and Federal Reserve policy,” said Lynn Fisher, MBA vice president of research and economics.
The average 30-year mortgage decreased to 4.32 percent from 4.39 percent.
Mortgage applications to purchase a home rebounded a stronger 6 percent for the week. Purchase volume is still nearly 18 percent below where it was one year ago.
New Jersey Tops National Foreclosure List
For the second year in a row, New Jersey led the nation in home foreclosures in 2016, even as overall activity ebbed across the U.S.
The culprits: a significant backlog in cases stemming from New Jersey’s cumbersome foreclosure process and the state’s weak economy, housing experts said.
For the year, 1.86% of homes in New Jersey were in foreclosure, according to a report from ATTOM Data Solutions. That was slightly lower than the 1.91% in 2015.
The national average was 0.70%, said Daren Blomquist, a senior vice president at ATTOM. That is the lowest rate since 2006. The foreclosure rate peaked at 2.23% in 2010, just after the recession ended.
The lag reflects laws in states like New Jersey and New York that require time-consuming court proceedings before a foreclosed home can be auctioned off.
Jeffrey Otteau, an appraiser and president of the Otteau Group Inc., said the New Jersey foreclosure data also reflected the state’s weak economic performance since the last recession. In 2015, he noted, household income rose 0.4% in the state, compared with 3.7% for the nation.
“Jobs and income matter, and New Jersey is losing that battle,” he said.
read more: Wall St Journal
All In the Family
In mid-December, a parking lot was sold in Brooklyn’s Dumbo neighborhood for $345 million. It was no ordinary parking lot,the parcel came with 1.1 million square feet of development rights. One of its new owners, Jared Kushner, was planning to build something big there. Now Kushner might be looking to sell his stake sooner than expected, as he prepares to start his new job as senior adviser to his father-in-law, President-elect Donald Trump.
Read more: Crain’s
Have a productive day and a great weekend!
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