Joe Clements is co-editor of Debt and Equity Journal, from which this article is excerpted.

Chicago—Forecasts for the US debt market are more troublesome than they have been in a decade, and commercial mortgage-backed securities specialist William T. Barry joins other industry experts fretting that even swift action from the Federal Reserve will not be enough to turn industry fortunes over the near term. CMBS buyers have become decidedly hesitant to accept paper hinting of risk, Barry says, and that has curbed production because lenders are loathe to warehouse notes long-term.

"Conditions are much worse than three months ago," the principal at Chicago-based Draper and Kramer tells Debt & Equity Journal. He adds that uncertainty about spread direction is further disrupting the CMBS pipeline.

Many CMBS lenders are retreating from the battleground, not only refusing to write new loans, but also trying to maneuver out of those already penned. Besides greater use of the "material adverse change" clause often incorporated into loan documentation, some lenders are inviting borrowers to buy back their loans at a discount to move them off the books. "We are starting to see an uptick of that," says one debt broker.