Mortgage-Backed Securities At Risk In The Bakken -- March 5, 2015

Fuel Fix is reporting: Oil bust threatens mortgage-backed securities in Wall Street-funded shale towns.

One such community is Williston, North Dakota.

Wall Street banks bundled debt on a dozen properties in Williston with other commercial mortgages into bond offerings sold in 2013 and 2014, according to Morgan Stanley. The majority of the loans are secured by apartment complexes and hotels built during the last five years as more than 200 oilfield-service firms moved into the town, according to Richard Hill, a real estate debt analyst at Morgan Stanley.

“There is increased risk that vacancies rise at these properties, bringing into question their long-term viability,” Hill said in an e-mail. The risk of being on the wrong end of a boom-and-bust cycle is easy to spot in a recent prospectus for commercial-mortgage bond buyers.

At Sand Creek Estates, a mobile-home park in Williston, about 179 of 225 pads are leased to corporate tenants, with the two largest being oil-service providers, according to documents provided to potential investors in a $1 billion CMBS offering issued in December.

Yup.