After more thought on this matter, I speculate that the Fed is being proactive to help banks continue to shor up their balance sheets with regard to their exposue to commercial real estate loans and the likelyhood of averting potential trouble ahead with the these securities. By the Fed offering a guarantee to investors of these loans, it is essentially facilitating the secondary market. This is very forward thinking. It initiates credit flow. Banks would be able be more comfortable to loan with a secondary market growing in strength.
With regard to URE, I would think that the reits involved would not necessarily see much change to their profitability, as their loans may be at a status quo.
It is incouraging the Proshares has increased the yeild on URE to 8.8%. This mean to me that the components of URE are infact profitable. There is money to pay a dividend.
Why would URE go to $1.00. It wouldn't. I think the view is out the front window, not the rear view mirror. Be positive.
LOL URE yields 8.8% because it is twice IYR so there is twice the yield. You have to understand that the TAlf is for banks and not REITS and no matter how much money you throw at it, it will not stop rising vacancies in retail and office space and rising unemployments The commerical real estate expanded 300% in the last 10 years and 100 billion is like a penny out of twenty dollars lol. URE will continue to go down and the 8.8% yield has not been updated since the dividend cuts
no its a very simple explanation. REITS have run up 50-60% in the last month with the thought that the loans would be extended to REITS and also Quant funds dumping short positions on REITS. Now the the TALF was a disapointment as well as REIT earnings coming out terrible and REIT dividens being cut 30-50%. REIT's are not 70% overvalued and yielding only 1% point over 30 year treasuries and 2% points less then 20 year AAA bonds and 7 times more risk then bonds that no one wants them anymore.
I would be reasonable to say that the most leveraged loans are the the latest ones being addressed by the Fed. These loans would have more vunerable LTV ratios. Older loans would be more seasoned have more equity and be preforming better.
Why the sell off? Emotions.
the fed will address " legacy loan" only if there is money left. At this point the fed has no idea how far the first 100 billion will go. No one knows and it will also depend on how long or bad the recession will last.
This article did also say that the Fed is planning to address the older legacy loans as well. Will the Fed or won't the Fed do this. I think that the Fed will have to broaden the "life line." What they are offering is a good start. I beleive that there will be more to come, because it will be necessary.
Sorry, the updated article says that it will only modify loans that are new loans and only with the best credit scores. Any older loans prior to mid 2008 do not qualify because values have gone down and they all have heavy credit burdens in 90% of the REITS so 90% of the REITS do not even qualify under this program
Maybe I am getting this wrong, but I understand that the Fed is "backing Commercial Realeatate Mortgage Backed Securities."
Why would this not be favorable?
By the way, your tone is condescending. This dicussion should not be about who is inteligent here. It is just exchange.