Delinquency Rates for Commercial Mortgage-Backed Securities Skyrocketing, but Fed Scoops Them Up
July 17, 2020 (EIRNS)—Commercial mortgage-backed securities (CMBS) are experiencing near record levels of delinquency, threatening to puncture the entire mortgage-backed security sector of the United States, and thus the world financial bubble.
When pools of bank and financial institution loans are “securitized into CMBS,” they are packaged into bonds, divided into tranches, and sold to investors: insurance companies, banks, etc. According to the Visual Capitalist publisher, as of June, 24.3% of the CMBS of “accommodations establishments”—hotels, restaurants and bars—are delinquent, meaning they are 30 days behind in payments. And 18.1% of the CMBS of retail establishments—such as stores and supermarkets—are delinquent. Some, in fact, are months behind in payments.
The danger is that some of the CMBS will default, pulling down the $20 trillion intertwined commercial and residential mortgage-, and mortgage-backed security market in the United States, and threatening the U.S. financial bubble.
To paper that tottering market over, during the past week, the U.S. Federal Reserve bought $23 billion of mortgage-backed securities. Since March 11, the Federal Reserve’s asset holdings of mortgage-backed securities have risen from $1.38 trillion to $1.95 trillion, an increase of more than $500 billion. Think of what those funds could do, instead, funding fusion power development, or an expansion of the Artemis program.
Currently, the Fed is putting itself more and more on the hook for the worthless mortgage-backed paper, whose explosion will bring down the world financial system.