Banks Revisit Mortgage-Backed Securities

Investors are starting to buy up billions of dollars in mortgages that have been stuck on the books of banks, but that hasn’t yet freed up money for new mortgages.

(Realtor) -- In the past four weeks, banks have gone to market with four issues of commercial mortgage backed securities with a total balance of $4.9 billion, according to data provider Commercial Real Estate Direct. That’s a big improvement from weeks earlier this year when there were no deals, but down from the same period last year, when the issuance totaled $78.7 billion. Banks are offering the securities at discounts ranging from 5 percent to 20 percent, but those discounts are modest compared to what vulture investors got in the wake of the last major real-estate collapse in the early 1990s. That’s because default rates on commercial real estate remain low by historical standards. And there’s a lot of cash available. Banks don’t have to take the low-ball offers.