And the Momentum is going Which Way?


My team and I have spent the better part of the past eight weeks dealing with Irish loans and other portfolios of…stuff. While the conduit market was imploding, pipelines were being aggressively repriced and loan production was shifting into a very low gear, there has been a full scale feeding frenzy for portfolios of seasoned loans. While new loan originations were being dragged through the knot hole of torturous and ultimately paralytic analysis, millions of dollars were spent in high speed car chases for billions of dollars of seasoned loans in awkward, brief and brutal auctions.

Cognitive dissonance anyone? These are alternate universes. In the Ordinary Course Loan Origination Universe, every proposal suffers the death of a thousand cuts: “OK, maybe it’s a pretty good loan but I need to really understand what happens if the anchor tenant leaves, the president of the management company gets arrested and an asteroid hits Ohio. What exactly happens in the cash flow?” In the Alternate "Bid ‘Em Up Universe", crappy reps, document defects and weird deal features? Fine! Win the bid!

In the meantime, back in Alternate Universe A, getting a loan approved and closed still seems to be just plain tough. Spreads are volatile, hedging simply isn’t doable, and for the human beings involved in the trade, risk and reward is highly asymmetrical: an attaboy on the upside and a pink slip on the down.

Alternate universes make terrific grist for sci-fi potboilers, but are somewhat more disturbing in real life. And since it is, in fact, our real life, this bears musing about some.

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