Many commercial real estate loans originated in the United
States are resold to investors as commercial mortgage-backed
securities (CMBSs). Under these programs, lenders originate the
loans, but then later resell them as parts of larger pools into
the CMBS market. In the fourth quarter of 2007, the national
crisis in residential subprime lending spilled over into the
commercial real estate loan arena, causing increased volatility
in the CMBS market. As a result, many lenders are experiencing
difficulties reselling their commercial real estate loans into
the CMBS market. In this new lending environment, lenders are
increasingly seeking to renegotiate, or even back out of, their
loan commitments and/or rate lock agreements with investors.
Lenders often use the material adverse change, or so-called
"MAC" clauses, in their documents to renegotiate
investors' loan commitments and/or rate lock
agreements.
