
According to Jim Butler of Global Hospitality Group, things are about to get ugly.
In fact, he's predicting veritable warfare. Tranche warfare, that is, among the holders of varying slices of a very complex pie. Which pie? The commercial mortgage pie. And folks we're talking about a whole lot of money.
Read his whole post if you can. I did and I can tell you this. It does not sound good at all.
According to Jim, tranche warfare is inevitable because:
* The dollar volume of CMBS loans is huge
* Loan delinquencies, defaults and losses are soaring and the trend will continue
* Owners of first loss positions will look to make themselves whole if only to discharge their fiduciary duties to their companies, shareholders or other stake holders
* The conflicting interests of special servicers and investors creates a fertile ground for claims
* Lawsuits will explore previously untested provisions of PSAs dealing with the Servicing Standard and other duties of special servicers
In plain English, here's the sitch.
Delinquencies and defaults of the underlying loans that make up the varying tranches of Commercial Mortgage Backed Securities are ballooning.
The exposure is mindbogglingly huge. How huge? How does $800 billion sound? Scared yet? How much of that will go bad? More than you want to think about when the panic breaks out.
Everyone's going to be looking out for their own interests and there are conflicts of interest all over the place. We're talking dumping properties, forcing sales if needed to do that, and other ugly business.
Lawsuits will fly.
The agreements are complex. Hundreds of pages long. Plenty of room for fighting it out.
Big big bucks at stake.
Yep, it's going to get ugly.
For background you might go back to 2006 when Jim wrote about the train wreck that is coming into the station now.
Think it won't impact you? Think again.







































