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Goldman Sachs and Citigroup Ready $788M CMBS Offering

The two corporate names linked in recent weeks to high-profile settlements with the ""Securities and Exchange Commission"":http://www.sec.gov (SEC) over questionable practices related to[IMAGE] mortgage investments are teaming up to bring to market the year's third multi-borrower bond backed by commercial real estate.

""Goldman Sachs"":http://dsnews.comarticles/goldman-sachs-pays-550m-to-settle-sec-fraud-suit-2010-07-16 and ""Citigroup"":http://dsnews.comarticles/citi-charged-with-misleading-investors-about-exposure-to-subprime-mortgages-2010-07-29 are putting together a $788.5 million commercial mortgage-backed security (CMBS) offering, according to a recent report from _Bloomberg_, citing sources familiar with the matter.

The issue is said to include debt from 48 properties, with retail facilities accounting for 78.2 percent of the loan pool and office space comprising 10.4 percent, ""the news agency said"":http://www.bloomberg.com/news/2010-07-28/goldman-citigroup-plan-to-sell-788-5-million-of-commercial-mortgage-debt.html.


New financial reform rules outlined in the Dodd-Frank Wall Street Reform and Consumer Protection Act could change the face of commercial real estate's secondary market, and that has some industry players worried. Liquidity channels for commercial real estate financing have been severely strained for the past two years, as the securities market for these assets all but dried up.

In 2009, total CMBS issuance came to just around $3 billion, compared with $230 billion in 2007.

Some market observers expect the slow puttering of the CMBS market to continue for months, or even years, as regulators set to the daunting task of putting pen to paper to give the Dodd-Frank reforms some actual substance.

Coming down the line will be new guidelines on the rating of securities. A new Office of Credit Ratings within the SEC has been tasked with ensuring greater transparency to the rating process and reducing conflicts of interest among credit ratings agencies.

In addition, a new risk retention mandate included in the language of the reform legislation requires banks that securitize loans to keep 5 percent of the credit risk on their own balance sheets, rather than passing the full gamble on performance off to investors, as has been the case in the past.

About Author: Carrie Bay

Carrie Bay is a freelance writer for DS News and its sister publication MReport. She served as online editor for DSNews.com from 2008 through 2011. Prior to joining DS News and the Five Star organization, she managed public relations, marketing, and media relations initiatives for several B2B companies in the financial services, technology, and telecommunications industries. She also wrote for retail and nonprofit organizations upon graduating from Texas A&M University with degrees in journalism and English.

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