by Calculated Risk on 5/28/2009 05:56:00 PM

From Bloomberg: GM Said to Plan June 1 Bankruptcy as Debt Plan Gains

General Motors Corp. ... plans to file for bankruptcy protection on June 1 and sell most of its assets to a new company, people familiar with the matter said.

GM SEC Filing:

As provided in the Proposal, the U.S. Treasury has indicated that if holders of Notes of an amount satisfactory to the U.S. Treasury have provided (prior to 5:00 pm EDT on Saturday, May 30, 2009) statements of support satisfactory to the U.S. Treasury indicating that they will not oppose the 363 Sale (if conducted on terms substantially consistent with the Proposal), the U.S. Treasury currently would propose that New GM issue to Old GM as a portion of the consideration offered in connection with the 363 Sale 10% of the common equity of New GM and warrants to purchase an aggregate of 15% of the equity of New GM. The U.S. Treasury has indicated that if these statements of support are not received, the amount of common equity and warrants that it would propose be issued by New GM to Old GM would be substantially reduced or eliminated.

Also from the NY Times: New G.M. Plan Gets Support From Key Bondholders

It sounds like they made the bondholders a deal they couldn't refuse.

by Calculated Risk on 5/28/2009 04:00:00 PM

Note: Market graph at bottom of post
Press Release: ATA Truck Tonnage Index Fell Another 2.2 Percent in April (ht dryfly)

The American Trucking Associations' advance seasonally adjusted (SA) For-Hire Truck Tonnage Index fell 2.2 percent in April, after plunging 4.5 percent in March. April marked the second sequential decrease. In April, the SA tonnage index equaled just 99.2 (2000 = 100), which is its lowest level since November 2001. The not seasonally adjusted (NSA) index, which represents the change in tonnage actually hauled by the fleets before any seasonal adjustment, was down 2.9 percent from March. In April, the NSA index equaled 101.6.

Compared with April 2008, tonnage contracted 13.2 percent, which was the worst year-over-year decrease of the current cycle and the largest drop in thirteen years. In March 2009, tonnage dropped 12.2 percent from a year earlier.

ATA Chief Economist Bob Costello said truck tonnage is getting hit from both the recession and the massive inventory correction that the supply chain is currently undergoing. "While most key economic indictors are decreasing at a slower rate, the year-over-year contractions in truck tonnage accelerated because businesses are right-sizing their inventories, which means fewer truck shipments," Costello said. "The absolute dollar value of inventories has fallen, but sales have decreased as much or more, which means that inventories are still too high for the current level of sales. Until this correction is complete, freight will be tough for motor carriers." Costello added that truck freight has yet to hit bottom and it could be a few more months before this occurs.
emphasis added

Click on graph for larger image in new window. This graph is from Doug Short of dshort.com (financial planner): "Four Bad Bears". Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.

by Calculated Risk on 5/28/2009 02:41:00 PM

From Reuters: MidAmerican's Sokol sees US housing staying weak (ht Alexander, Cord)

David Sokol, chairman of Berkshire Hathaway Inc's MidAmerican Energy Holdings and a contender to succeed Warren Buffett, warned that the U.S. housing market still has a ways to go before bottoming out.
...
"As we look at the economy, I have to be honest: we're not seeing the green shoots," Sokol said ... "We think the official statistics of 10 to 12 months' backlog is actually nearly twice that amount," ...

"There is an enormous shadow backlog of about-to-be foreclosed homes and of individuals who need to sell but have time, and there are already six (for sale) signs on their block," he said.

... "It will be be mid-2011 before we see a balancing of the existing home sales market." He defined "balanced" as a six-month backlog.

by Calculated Risk on 5/28/2009 12:11:00 PM

For graphs based on the new home sales report this morning, please see: New Home Sales Flat in April

Yesterday, the National Association of Realtors (NAR) reported that "Distressed properties ... accounted for 45 percent of all sales in April". Distressed sales include REO sales (foreclosure resales) and short sales, and based on the 4.68 million existing home sales (SAAR) that puts distressed sales at a 2.1 million annual rate in April.

That fits with the MBA foreclosure and delinquency data released this morning that shows that "3.85% of all mortgages somewhere in the foreclosure process at the end of the first quarter".

All this distessed sales activity has created a gap between new and existing sales as shown in the following graph that I've jokingly labeled the "Distressing" gap.

This is an update including April new and existing home sales data.

Click on graph for larger image in new window.

This graph shows existing home sales (left axis) and new home sales (right axis) through March.

As I've noted before, I believe this gap was caused by distressed sales - in many areas home builders cannot compete with REO sales, and this has pushed down new home sales while keeping existing home sales activity elevated.

Over time, as we slowly work through the distressed inventory of existing homes, I expect existing home sales to fall further - See Existing Home Sales: Turnover Rate - and eventually for the distressing gap to close.

by Calculated Risk on 5/28/2009 10:21:00 AM

From Bloomberg: Mortgage Delinquencies, Foreclosures Hit Records on Job Cuts

... The U.S. delinquency rate jumped to a seasonally adjusted 9.12 percent and the share of loans entering foreclosure rose to 1.37 percent, the Mortgage Bankers Association said today. Both figures are the highest in records going back to 1972.
...
The inventory of new and old defaults rose to 3.85 percent, the MBA in Washington said. Prime fixed-rate mortgages given to the most creditworthy borrowers accounted for the biggest share of new foreclosures at 29 percent, and prime adjustable-rate mortgages were 24 percent, Brinkmann said. It shows the mortgage problem has shifted from a subprime issue to a job-loss problem, he said.
emphasis added

We're all subprime now!

UPDATE: From MarketWatch: Foreclosures break another record in first quarter

Total foreclosure inventory was also up, with 3.85% of all mortgages somewhere in the foreclosure process at the end of the first quarter, compared with 3.3% in the fourth quarter -- also a record jump.
...
While subprime, option ARM and Alt-A loans were a focus of the foreclosure problem initially, the foreclosure rate on prime fixed-rate loans has doubled in the last year.

"For the first time since the rapid growth of subprime lending, prime fixed-rate loans now represent the largest share of new foreclosures," Brinkmann said -- evidence, he added, of the impact that the recession and drops in employment are having on the foreclosure numbers.

Note: I haven't seen a copy of the MBA report yet.

by Calculated Risk on 5/28/2009 10:00:00 AM

The Census Bureau reports New Home Sales in April were at a seasonally adjusted annual rate (SAAR) of 352 thousand. This is essentially the same as the revised rate of 351 thousand in March.

Click on graph for larger image in new window.

The first graph shows monthly new home sales (NSA - Not Seasonally Adjusted).

Note the Red columns for 2009. This is the second lowest sales for April since the Census Bureau started tracking sales in 1963. (NSA, 33 thousand new homes were sold in March 2009; the record low was 32 thousand in April 1982).

As the graph indicates, sales in April 2009 were substantially worse than the previous years.

The second graph shows New Home Sales vs. recessions for the last 45 years. New Home sales have fallen off a cliff.

Sales of new one-family houses in April 2009 were at a seasonally adjusted annual rate of 352,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development.

This is 0.3 percent (±14.5%)* above the revised March rate of 351,000, but is 34.0 percent (±11.0%) below the April 2008 estimate of 533,000.

And another long term graph - this one for New Home Months of Supply.

There were 10.1 months of supply in April - significantly below the all time record of 12.4 months of supply set in January.

The seasonally adjusted estimate of new houses for sale at the end of April was 297,000. This represents a supply of 10.1months at the current sales rate.

The final graph shows new home inventory.

Note that new home inventory does not include many condos (especially high rise condos), and areas with significant condo construction will have much higher inventory levels.

It appears the months-of-supply for inventory has peaked, and there is some chance that sales of new homes has bottomed for this cycle - but we won't know for many months. However any recovery in sales will likely be modest because of the huge overhang of existing homes for sale. I'll have more ...

by Calculated Risk on 5/28/2009 08:30:00 AM

Another week, another record for continued claims.

The DOL reports on weekly unemployment insurance claims:

In the week ending May 23, the advance figure for seasonally adjusted initial claims was 623,000, a decrease of 13,000 from the previous week's revised figure of 636,000. The 4-week moving average was 626,750, a decrease of 3,000 from the previous week's revised average of 629,750.
...
The advance number for seasonally adjusted insured unemployment during the week ending May 16 was 6,788,000, an increase of 110,000 from the preceding week's revised level of 6,678,000.

Click on graph for larger image in new window.

This graph shows weekly claims and continued claims since 1971.

Continued claims are now at 6.79 million - an all time record. This is 5.1% of covered employment.

Note: continued claims peaked at 5.4% of covered employment in 1982 and 7.0% in 1975. So this isn't a record as a percent of covered employment.

The four-week average decreased this week by 3,000, and is now 32,000 below the peak of 7 weeks ago. There is a reasonable chance that claims have peaked for this cycle, but it is still too early to be sure, and if so, continued claims should peak soon.

The level of initial claims (over 623 thousand) is still very high, indicating significant weakness in the job market.

by Calculated Risk on 5/28/2009 12:22:00 AM

From the WaPo: U.S. Weighs Single Agency to Regulate Banking Industry

Senior administration officials are considering the creation of a single agency to regulate the banking industry ...

They favor vesting the Federal Reserve with new powers as a systemic risk regulator, with broad responsibility for detecting threats to the financial system. The powers would include oversight of previously unregulated markets, such as the derivatives trade, and of market participants such as hedge funds.

Officials also favor the creation of a new agency to enforce laws protecting consumers of financial products such as mortgages and credit cards.
...
Among these ideas is the creation of a single agency to regulate banks. The new regulator would assume responsibility for the safety and soundness of banks, currently divided among the Fed and three other agencies: the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the Federal Deposit Insurance Corp. The OCC and the OTS would probably disappear, while the Fed and the FDIC would retain other responsibilities.
...
Officials also are considering giving the FDIC the power to seize large financial firms, such as the parent companies of banks, to prevent their collapse.

Another potential problem was that many banks and mortgage lenders were regulated by the states. See Conference of State Bank Regulators (CSBS) Update: Many state regulators did an excellent job (I was in contact with several in 2005) - however in making regulatory changes, we need to be aware of the role of the states.

by Calculated Risk on 5/27/2009 08:39:00 PM

From the WSJ: Plan to Buy Banks' Bad Loans Founders

The Legacy Loans Program [LLP], being crafted by the Federal Deposit Insurance Corp., [as] part of the $1 trillion Public Private Investment Program [PPIP] ... is stalling and may soon be put on hold, according to people familiar with the matter.
...
PPIP was to be split between the FDIC program, which would buy whole loans, and one run by the Treasury Department focusing on securities. Treasury is expected to push ahead with its plan -- the larger and more substantial of the two -- and could begin purchases sometime this summer.

Also FDIC Chairwoman Sheila Bair said today that banks would not be allowed to use the PPIP to buy their own assets. But she didn't rule out banks buying assets from each other. From Rolfe Winkler writing at Naked Capitalism: FDIC Won't Rule Out Banks as Buyers of Toxic Assets

Below, I've transcribed Bair's full response to the question she was asked about PPIP....

No [banks] will not be able to bid on their own assets. I think there has been some confusion about that....There will be no structure where we would allow banks to bid on their own assets. I think there have been separate issues about whether banks can be buyers on other bank assets and I think that's an issue that we continue to look at.

This is probably OK if a healthy bank is a buyer only and doesn't sell any assets using the PPIP. But banks shouldn't be both buyers and sellers.

by Calculated Risk on 5/27/2009 07:01:00 PM

Earlier we discussed the rising ten year yield (treasury sell-off) and the impact on mortgage rates ... and here is some more interest rate news: the yield curve (ten year yield minus two year yield) is at record levels.

From Bloomberg: Yield Curve Steepens to Record as Debt Sales Surge

The difference in yields between Treasury two- and 10-year notes widened to a record on concern surging sales of U.S. debt will overwhelm the Federal Reserve’s efforts to keep borrowing costs low.

The so-called yield curve steepened to 2.75 percentage points, surpassing the previous record of 2.74 percentage points set on Aug. 13, 2003.

Click on graph for larger image in new window.

This graph shows the difference between the ten- and two-year yields.

Usually a steep yield curve precedes a period of decent growth, but several analysts suggest the current ten year sell-off is due to concerns about increased Treasury issuance to finance the deficit. Whatever the reason, this is a challenge for the Fed to keep mortgage rates low.

NOTE: For amusement, check out this New Yorker cartoon by David Sipress: "Wasn't that Paul Krugman?"

by Calculated Risk on 5/27/2009 04:13:00 PM

From the WSJ: Bondholders Push GM to Brink of Bankruptcy

General Motors Corp. bondholders soundly rejected a debt-swap offer critical to the auto maker's survival, pushing the company closer to a bankruptcy filing that could come in the next few days.

Not a surprise.

And by popular demand ...

Click on graph for larger image in new window. The first graph is from Doug Short of dshort.com (financial planner): "Four Bad Bears". Note that the Great Depression crash is based on the DOW; the three others are for the S&P 500.

The second graph compares four significant bear markets: the Dow during the Great Depression, the NASDAQ, the Nikkei, and the current S&P 500. See Doug's: "The Mega-Bear Quartet and L-Shaped Recoveries".

by Calculated Risk on 5/27/2009 02:30:00 PM

With the Ten Year Treasury yield hitting 3.7% today, mortgage rates will be increasing.

Click on graph for larger image in new window.

This graph shows the relationship between the Ten Year yield (x-axis) and the 30 year mortgage rate (y-axis, monthly from Freddie Mac) since 1971. The relationship isn't perfect, but the correlation is very high.

Based on this historical data, a Ten Year yield at 3.7% suggests a 30 year mortgage rate of around 5.6%.

The second graph compares the weekly 30 year fixed rate conforming rate from Freddie Mac, and the 10 year treasury yield. The black line is the spread between the two rates.

As the Ten Year yield increased earlier this year, the spread decreased, and mortgage rates only moved up slightly.

However the spread has reached the lower end of the range, and the recent increase in the Ten Year yield will push up mortgage rates.

by Calculated Risk on 5/27/2009 12:13:00 PM

To add to the earlier post, here is another way to look at existing homes sales: Monthly, Not Seasonally Adjusted (NSA):

This graph shows NSA monthly existing home sales for 2005 through 2009. Continuing the recent trend, sales (NSA) were lower in April 2009 than in April 2008.

A significant percentage of recent sales were foreclosure resales, and although these are real sales, I think existing home sales could fall even further when foreclosure resales start to decline sometime in the future.

The second graph shows inventory by month starting in 2004.

Inventory in April 2009 was below the levels in April 2007 and 2008 (this is the 3rd consecutive month with inventory levels below 2 years ago). Inventory levels have been below the year ago level for nine consecutive months.

It is important to watch inventory levels very carefully. If you look at the 2005 inventory data, instead of staying flat for most of the year (like the previous bubble years), inventory continued to increase all year. That was one of the key signs that led me to call the top in the housing market!

Note: there is probably a substantial shadow inventory – homeowners wanting to sell, but waiting for a better market - so existing home inventory levels will probably stay elevated for some time. There are also reports of REOs being held off the market, so inventory is probably under reported.

The third graph shows the year-over-year change in existing home inventory.

If the trend of declining year-over-year inventory levels continues in 2009 that will be a positive for the housing market. Prices will probably continue to fall until the months of supply reaches more normal levels (in the 6 to 8 month range comparted to the current 10.2 months), and that will take some time.

I'll have more on Existing Home sales tomorrow after New Home sales are released.

by Calculated Risk on 5/27/2009 10:58:00 AM

The FDIC released the Q1 Quarterly Banking Profile today. The FDIC listed 305 banks with $220.0 billion in assets as “problem” banks in Q1, up from 252 and $159.4 billion in assets in Q4.

Note: Not all problem banks will fail - and not all failures will be from the problem bank list - but this shows the problem is significant and still growing.

Here are two graphs from the FDIC:

And on the Deposit Insurance Fund:

The Deposit Insurance Fund (DIF) decreased by 24.7 percent ($4.3 billion) during the first quarter to $13,007 million (unaudited). Accrued assessment income added $2.6 billion to the DIF during the quarter. Interest earned combined with realized gains and unrealized losses on securities added $17 million to the DIF. Operating and other expenses net of other revenue reduced the fund by $264 million. The reduction in the DIF was primarily due to a $6.6 billion increase in loss provisions for actual and anticipated insured institution failures.

The DIF’s reserve ratio equaled 0.27 percent on March 31, 2009, down from 0.36 percent at December 31, 2008, and 1.19 percent a year ago. The March 31, 2009 reserve ratio is the lowest reserve ratio for a combined bank and thrift insurance fund since March 31, 1993, when the reserve ratio was 0.06 percent.

Twenty-one FDIC-insured institutions with combined assets of $9.5 billion failed during the first quarter of 2009, at an estimated cost to the DIF of $2.2 billion. Between March 31, 2008 and March 31, 2009, 44 insured institutions with combined assets of $381.4 billion failed, at an estimated cost to the DIF of $20.1 billion.

by Calculated Risk on 5/27/2009 10:00:00 AM

The NAR reports: Existing-Home Sales Rise in April

Existing-home sales – including single-family, townhomes, condominiums and co-ops – increased 2.9 percent to a seasonally adjusted annual rate of 4.68 million units in April from a downwardly revised pace of 4.55 million units in March, but were 3.5 percent below the 4.85 million-unit level in April 2008.
...
Total housing inventory at the end of April rose 8.8 percent to 3.97 million existing homes available for sale, which represents a 10.2 month supply at the current sales pace, compared with a 9.6-month supply in March.

Click on graph for larger image in new window.

The first graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in April 2009 (4.68 million SAAR) were 2.9% higher than last month, and were 3.5% lower than April 2008 (4.85 million SAAR).

It's important to note that close to half of these sales were foreclosure resales or short sales. Although these are real transactions, this means activity (ex-distressed sales) is under 3 million units SAAR.

The second graph shows nationwide inventory for existing homes. According to the NAR, inventory increased to 3.97 million in April. The all time record was 4.57 million homes for sale in July 2008. This is not seasonally adjusted.

Typically inventory increases in April, and then really increases over the next few months of the year until peaking in the summer. This increase in inventory was probably seasonal, and the next few months will be key for inventory.

Also, many REOs (bank owned properties) are included in the inventory because they are listed - but not all. Recently there have been stories about a substantial number of unlisted REOs - this is possible.

The third graph shows the 'months of supply' metric for the last six years.

Months of supply was up to 10.2 months.

Even though sales also increased slightly, inventory also increased, so "months of supply" increased slightly.

I'll have more on existing home sales soon ...

by Calculated Risk on 5/27/2009 08:39:00 AM

Back in 2007, when many lenders were going out of business, the MBA Purchase Index was distorted by the changes in the mortgage industry.

The lenders in the MBA survey accounted for about half the volume of applications during the housing boom, and most of the failed lenders were not included in the survey. So even though the housing market was in free fall in 2007, the surviving lenders actually saw an uptick in applications, distorting the Purchase Index.

At that same time many borrowers started filing multiple applications too, also distorting the survey results.

But it might be worth watching the index again.

The MBA reports that the Purchase Index increased 1.0 percent to 256.6 this week. The four week moving average (removes the weekly noise) increased to 260.2, and is now at the level of the late '90s.

Note: the refinance index declined as mortgage rates increased, but the index is still very high.

Click on graph for larger image in new window.

This graph shows the MBA Purchase Index and four week moving average since 2002.

Although we can't compare directly to earlier periods because of the changes in the index, this shows no pick up in overall sales activity.

by Calculated Risk on 5/27/2009 12:17:00 AM

From the WSJ: Banks Aiming to Play Both Sides of Coin

... Banking trade groups are lobbying the Federal Deposit Insurance Corp. for permission to bid on the same assets that the banks would put up for sale as part of the government's Public Private Investment Program.
...
The lobbying push is aimed at the Legacy Loans Program, which will use about half of the government's overall PPIP infusion to facilitate the sale of whole loans such as residential and commercial mortgages.

Federal officials haven't specified whether banks will be allowed to both buy and sell loans ...

Some critics see the proposal as an example of banks trying to profit through financial engineering at taxpayer expense, because the government would subsidize the asset purchases.
...
"The notion of banks doing this is incongruent with the original purpose of the PPIP and wrought with major conflicts," said Thomas Priore, president of ICP Capital, a New York fixed-income investment firm overseeing about $16 billion in assets.

Hopefully the answer will be a resounding "NO". The purpose of PPIP is to remove the toxic legacy assets from the bank's balance sheet, not to allow the banks to game the program at taxpayer expense.

Either a buyer or a seller be - but not both.

by Calculated Risk on 5/26/2009 09:08:00 PM

The lack of move up buyers is starting to get attention ...

From David Streitfeld at the NY Times: Home Prices Decline Again in March

In many urban areas, including those tracked by Case-Shiller, the residential real estate market is essentially cleaved in two. The top half of the market is largely stagnant, with owners unwilling to sell and buyers unable to buy. “Move-up” families seeking another bedroom or a better kitchen are an endangered species.

And from Carolyn Said at the San Francisco Chronicle: Signs of more trouble ahead for housing market

No "move-up" buyers. In a normal real estate market, about 80 percent of buyers are "moving up" or "moving across" - people who sell one home before buying another, said Mark Hanson, principal of Walnut Creek's the Field Check Group, a mortgage consultant. Remaining purchasers are split between first-time buyers and investors.

In today's market, about half of buyers are first-timers and a third are investors, leaving just 15 percent of what he calls "organic" buyers. Those first-timers and investors all troll for bargain-basement foreclosures - leaving few buyers who are interested in the homes being sold by "Ma and Pa Homeowner." That, in turn, leaves Ma and Pa unable to move up to a nicer home. "The organic seller is left out in the cold," he said.

This is going to be a serious problem for the mid-to-high end home sellers. Just wait ...

Note: Carolyn Said lists a number of additional problems ...

by Calculated Risk on 5/26/2009 05:38:00 PM

From the NY Times: Manhattan’s Sublet Office Market Is Bursting (ht Sunil)

In Midtown Manhattan ... 13 percent of ... Class A space — was available in April, up from 7.2 percent a year earlier, according to Colliers ABR, a commercial real estate services company. And sublets now account for some 40 percent of the space available in Midtown, compared with 30 percent of the much smaller total that was available a year ago, the company said.
...
Robert Sammons, the managing director in charge of research at Colliers ABR, said that sublet space in trophy office towers along Madison Avenue and Park Avenue has been leasing for as little as one-third of what that space might have commanded in early 2008, at the height of the roaring market.

“A year and a half ago, this space might have leased for $150 per square foot,” Mr. Sammons said, while he has heard of recent sublets in high-end buildings in this office corridor with annual rents of as little as $40 to $50 per square foot. “This is the most remarkable turnaround in pricing that I’ve ever seen in such a short period of time.”

No wonder S&P is concerned about CMBS.

Note: that $150 sounds high, so maybe it just half off!

by Calculated Risk on 5/26/2009 04:28:00 PM

S&P put out a request for comment today titled: U.S. CMBS Rating Methodology And Assumptions For Conduit/Fusion Pools (ht Will, Jason, all)

It is likely that the proposed changes, which represent a significant change to the criteria for rating high investment-grade classes, will prompt a considerable amount of downgrades in recently issued (2005-2008 vintage) CMBS. Classes up through the most senior tranches of outstanding deals (so-called "A4s," "dupers," or "super-duper seniors") are likely to be affected. Our preliminary findings indicate that approximately 25%, 60%, and 90% of the most senior tranches (by count) within the 2005, 2006, and 2007 vintages, respectively, may be downgraded. We believe these transactions are characterized by increasingly more aggressive underwriting than prior vintages. Furthermore, recent vintage CMBS, particularly those issued since 2006, were originated during a time of peak rents and values, and as such, may be more affected by the proposed rental declines discussed in this RFC. We are currently evaluating the impact of the potential criteria changes on conduit/fusion CMBS transactions from all vintages. Once we evaluate the potential impact on existing ratings, we expect to issue a follow-up publication to this RFC.
emphasis added

From Bloomberg: Top-Graded Commercial Mortgage Debt May Face Cuts

The highest-graded bonds backed by commercial mortgages may be cut by Standard & Poor’s, potentially rendering the securities ineligible for a $1 trillion U.S. program to jumpstart lending.

As much as 90 percent of so-called super senior commercial- mortgage backed bonds sold in 2007 may be affected as the ratings firm changes how it assesses the debt, New York-based S&P said today in a report.

“We believe these transactions are characterized by increasingly more aggressive underwriting than prior vintages,” S&P said. “Furthermore, recent vintage CMBS, particularly those issued since 2006, were originated during a time of peak rents and values,” and may be more affected by falling rents.

This undermines the Fed's efforts to expand the TALF to legacy CMBS. These downgrades would make Super-Senior CMBS ineligible for Legacy TALF funding. Of course the Fed could change the rules ...