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Industry Lobbies For Exemption From Proposed Securitization Regulations

Commercial Mortgage Securities Association urges Senate Banking Committee to carve out securitization market exemptions.

The Commercial Mortgage Securities Association, backed by a coalition of lenders, brokers and borrowers, is urging Christopher Dodd (D-Conn.), the chairman of the Senate Banking Committee, and Richard Shelby (R-Ala.), the ranking member of the committee, to carve out exemptions for commercial real estate in legislation that is being proposed for the securitization market. The Senate is expected to begin drafting its version of the bill as early as this week.

The trade group sent a letter that asks Dodd and Shelby to consider the “uniqueness of the markets” that finance the $6 trillion commercial real estate sector. In particular, the CMSA is asking the senators to recognize the role of B-piece buyers in commercial mortgage-backed securities deals as satisfying the retention risk requirements for having skin in the game. As purchasers of the first-loss position, the letter argues that B-piece buyers provide extensive due diligence on the loan pool and even re-underwrite loans.

The CMSA has supported the House version of the bill, which includes a 5% retention risk requirement for CMBS and recognizes the position of B-piece buyers. Brendan Reilly, senior v.p. of government relations at the CMSA, said that any Senate bill would need to reconcile any language passed in the House.

The question of retention requirements is important, particularly in light of the impact of accounting changes to FAS 166 and 167. “The combined impact of accounting and regulatory changes creates a tremendous amount of uncertainty and a huge impediment to lending,” Reilly added. The CMSA’s sense is that while these issues may not be addressed in the first draft because of the broad nature of the legislation, the expectation is that it will be included in the final version.

While the initial version of the bill may not include the desired language, the trade group will continue to voice its concerns with legislators. “This is an election year and people have suggested that the whole process could take until July,” he added.

Source: Real Estate Finance & Investment

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