Saturday, April 18, 2009
JPMCC 2008-C2 & JPMCC 2007-C1 Appraisal Reductions
The fact that there were appraisal reductions related to the Promenade Shops at Dos Lagos and the Westin Portfolio (in both JPMCC 2007-C1 and 2008-C2), which were so widely reported in November they helped move the market to historical wides, was no surprise. However, the ASER calculation was off by a $100,000 on the Promenade Shops loan - a mistake that you really don't expect to see. It is a rather simple calculation.
Keeping in mind the '08 deal in particular was a small deal dominated by several large weak loans, the interest shortfall reached high into the capital stack effecting as high up as the A-rated (orig. rating) F class (higher if they stick to the incorrect calculation - there has not been a comment on the error yet...). This is significant - the subordination rate on this class is over 9% (3x historical losses) and it's already being hit with shortfalls. Again, it was a weak deal, a small deal, and a chunky deal, but a significant event nonetheless.
The 2008-C2 deal has since added another large delinquency to its list of problems. Regency Portfolio is a 60-day delinquent $25 mm loan on 20 properties mostly located in Iowa. More on this later...
The whole story is worth putting up the picture of the man, J.P. Morgan, with a knife in his hand ready to cut out the entrails of the poor originator who made these pathetic loans in the first place.