MBA applauds Fed's CMBS stimulus as credit index hits 5-year low

The Federal Reserve's $2.3 trillion loan stimulus includes plans for outstanding commercial mortgage-backed securities and newly issued collateralized loan obligations.

The Federal Reserve announced Thursday it will provide up to $2.3 trillion in loans, with the goal of supporting credit flow to both consumers and businesses throughout the coronavirus crisis.

As part of the stimulus, triple-A rated tranches of both outstanding commercial mortgage-backed securities and newly issued collateralized loan obligations became eligible for the Term Asset-Backed Securities Loan Facility program.

NMN04092020-MBA.png

"MBA applauds the Federal Reserve for announcing its intent to include outstanding private-label CMBS AAA securities in its TALF program, which was re-established on March 23 to provide more liquidity to securities markets," Robert Broeksmit, Mortgage Bankers Association president and CEO, said in a press release. "This decision protects borrowers by stabilizing commercial mortgage markets more broadly and helps ensure lenders can continue to finance properties – particularly in small and mid-sized markets across the country, where numerous small businesses employ millions of Americans."

This relief comes at a moment when indicators for consumers in the market show signs of strain. After three consecutive months of decreases in home mortgage credit availability, it plummeted to a five-year low in March amid coronavirus volatility, according to the MBA.

March's Mortgage Credit Availability Index fell 16% to 152.1 from 181.3 in February, and 182.1 a year ago. Availability in all loan types dropped, resulting in the Index's lowest level since June 2015.

CORONAVIRUS IMPACT: ADDITIONAL COVERAGE
BDO's building in Akron, Ohio
Michael Cohn
January 13, 2021 4:51 PM

A majority of middle-market CFOs are predicting an economic recovery and revenue increases for their companies in 2021, according to a new survey by BDO USA.

2 Min Read
U.S. Department of the Treasury Internal Revenue Service (IRS) 1040 Individual Income Tax forms for the 2016 tax year are arranged for a photograph in Tiskilwa, Illinois, U.S., on Monday, Dec. 18, 2017. This week marks the last leg of Republicans' push to revamp the U.S. tax code, with both the House and Senate planning to vote by Wednesday on final legislation before sending it to President Donald Trump. Photographer: Daniel Acker/Bloomberg
By Laura Davison and Allyson Versprille
January 13, 2021 1:54 PM

Tax-refund delays and stimulus-payment hiccups could spill into the upcoming tax season as the Internal Revenue Service continues to face challenges related to the coronavirus pandemic and as Congress considers yet another round of direct payments.

3 Min Read
economic-impact-payment.jpg
Shaun Hunley
January 13, 2021 10:46 AM

With the filing season upon us, a raft of brand new challenges await ahead of the April 15 deadline.

2 Min Read

"Lenders are making credit criteria changes to account for the increased likelihood of forbearance and defaults, as well as higher costs," Joel Kan, the MBA's associate vice president of economic and industry forecasting, said in a press release. "There was also a significant drop in availability of Libor-indexed ARMs, as lenders acted on the GSEs' announcement to halt purchases of those loan products."

Advertisement

From February, the conventional product MCAI declined by 24.2%, with jumbo portion down by 36.9%, the government mortgage MCAI decreasing by 6.6% and the conforming component down by 2.7%.

"There was a reduction in the availability of loans with lower credit scores and higher LTV ratios, and the largest pullback came from the jumbo and non-QM space," Kan said. "This month's release highlights the large retreat from jumbo and non-QM investors due to a sharp drop in liquidity."

Credit usually expands for consumers during the spring home buying season. However, with uncertainty in the overall market, credit guidelines continue to tighten as a product of the coronavirus.

The MCAI is calculated by the MBA using loan program data from Ellie Mae's AllRegs Market Clarity database. It was benchmarked to a value of 100 based on conditions in March 2012.