Invoking The BIG MAC Clause
To raise "locked in" rates on loans prior to funding and free themselves from lending obligations...
Large banks like Sillybank AKA Citigroup are now invoking the "material adverse change" clause...
Banks are applying the concept to avoid lending at money-losing rates, scuttling deals,
leaving borrowers at risk and casting doubt on contracts that have already been negotiated.
The re-emergence of the MAC clause comes as 10-year fixed conduit spreads for commercial mortgage-backed securities
-- one measure of the cost of commercial real estate lending -- more than tripled to 291 basis points since November.
Should interest rates increase so as to "vaguely" create a material adverse change for the bank, your previously negotiated rates go up.
So in effect, your rate lock agreement only protects you in the event of a drop in interest rates.
Hattip to Bloomberg.
Large banks like Sillybank AKA Citigroup are now invoking the "material adverse change" clause...
Banks are applying the concept to avoid lending at money-losing rates, scuttling deals,
leaving borrowers at risk and casting doubt on contracts that have already been negotiated.
The re-emergence of the MAC clause comes as 10-year fixed conduit spreads for commercial mortgage-backed securities
-- one measure of the cost of commercial real estate lending -- more than tripled to 291 basis points since November.
Should interest rates increase so as to "vaguely" create a material adverse change for the bank, your previously negotiated rates go up.
So in effect, your rate lock agreement only protects you in the event of a drop in interest rates.
Hattip to Bloomberg.
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