Commercial Mortgage-Backed Securities are when banks sell groups of loans to investors. The valuation of a location is usually 12-14 times the annual rent paid, and directly tied to it.
Sort of, 12-14's doesn't necessarily make much sense because it depends on how the loan is constructed. Fundamentally, what's happening is that a lendee wants to buy a property. A Mortgage Broker (or retailer, or lending company, or whatever) will create a loan product for them that they can pay off with interest. That Broker/Retailer/Lender/Whatever can then combine these mortgages into a MBS and sell on the stock market. The investors buy these MBS's in order to get your interest payments as a form of profit or dividends on the MBS.
The sale price of the MBS fundamentally depends on the price of the price of all the mortgages in it, and NOT the theoretical rental price of it.
What this means is if people do the shit where they use the building itself as collateral for the loan (why is this allowed?)
Because that's an obvious thing to do. The lender gets the asset, to which they can sell to recoup any losses on the lendee defaulting on the loan.
The real problem here is that the government... all governments... have created the largest bubble in all of human history, based on the over-financialization of the economy through bonds, mortgages, and pensions.
To be honest, the investors aren't the problem here. They just want what amounts to a passive income (to keep up with the damage from inflation). The banks and lenders are partly responsible because they know that this is a game of musical chairs where someone get their asshole prolapsed when the music stops. The borrowers and lendees are partly to blame for thinking that they should spend their money in this absolute disaster, and they to, are playing this game of musical chairs.
The real problem here is the government. They are the ones playing the music. The chairs get removed because the music plays, so everyone keeps going around and around in circles until there's no more chairs.
Bad News: we ran out of chairs decades ago. Everyone's walking around in circles praying to God that the government's fiddle doesn't stop playing or we're all screwed. Up and down the city road; in and out the Eagle; that's the way the money goes... Pop goes the weasel.
There is no money.
The Perennial Gale of Creative Destruction will not be denied.
Sort of, 12-14's doesn't necessarily make much sense because it depends on how the loan is constructed. Fundamentally, what's happening is that a lendee wants to buy a property. A Mortgage Broker (or retailer, or lending company, or whatever) will create a loan product for them that they can pay off with interest. That Broker/Retailer/Lender/Whatever can then combine these mortgages into a MBS and sell on the stock market. The investors buy these MBS's in order to get your interest payments as a form of profit or dividends on the MBS.
The sale price of the MBS fundamentally depends on the price of the price of all the mortgages in it, and NOT the theoretical rental price of it.
Because that's an obvious thing to do. The lender gets the asset, to which they can sell to recoup any losses on the lendee defaulting on the loan.
The real problem here is that the government... all governments... have created the largest bubble in all of human history, based on the over-financialization of the economy through bonds, mortgages, and pensions.
To be honest, the investors aren't the problem here. They just want what amounts to a passive income (to keep up with the damage from inflation). The banks and lenders are partly responsible because they know that this is a game of musical chairs where someone get their asshole prolapsed when the music stops. The borrowers and lendees are partly to blame for thinking that they should spend their money in this absolute disaster, and they to, are playing this game of musical chairs.
The real problem here is the government. They are the ones playing the music. The chairs get removed because the music plays, so everyone keeps going around and around in circles until there's no more chairs.
Bad News: we ran out of chairs decades ago. Everyone's walking around in circles praying to God that the government's fiddle doesn't stop playing or we're all screwed. Up and down the city road; in and out the Eagle; that's the way the money goes... Pop goes the weasel.
There is no money.
The Perennial Gale of Creative Destruction will not be denied.
The Great Collapse will continue.
Be The Pinecone.