Ruthless, or Just Rational? - Part II
Linda Stahl is back with the follow-up to her discussion on strategic defaults.
Last time I raised the question of why voluntary defaults by homeowners have been such big news lately. I suggested that homeowners may breach more frequently than is best for society because nonrecourse debt spares homeowners the full cost of breach.
Ruthless, or Just Rational?
Today, The Line welcomes guest blogger Linda Stahl. Linda is a partner in our litigation practice. Using her experience in litigating issues affecting CMBS trusts and loan servicers, she will periodically share her insightful perspectives to The Line.
What Financial Regulatory Reform Means to Private Funds
The Line is pleased to bring you the first in an ongoing analysis of financial regulatory reform with this alert on the impact on private equity funds from several of our experienced colleagues, David Buck, Bill Rivers, Vic Zanetti and Peter Bogdanow.
On July 21, 2010, President Obama signed HR 4173, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”), which puts in place a substantial regulatory overhaul for business, especially in the financial industry. The Act includes various new laws affecting fund managers, the most notable of which is “hedge fund registration,” whereby advisers to hedge funds, as well as private equity funds, real estate funds and venture capital funds, will be required to register with and/or report to the SEC. Hedge fund registration, or “private fund registration,” will substantially enhance compliance costs for fund managers. While the Act generally affects larger funds, it contains a number of provisions that will be troubling for middle-sized and even smaller funds, as well as additional record-keeping requirements and reporting requirements for investment advisers to private funds. The Act also creates additional challenges and opportunities for private investment funds, including (i) limiting bank involvement in the private fund space, (ii) introducing new corporate governance reforms and (iii) regulating the trading of swaps.
Scoreboard
In early August, pennant fever begins to transform the casual baseball fan into a fanatic. At ballparks, eyes dart from the field to the scoreboard and back, manically monitoring the scores of games involving competitors. The scoreboard is as important as the game. Whether the home team is ahead or behind, it provides inning by inning thrill or solace, or both. (With our local team, the Texas Rangers, in the uncharted territory of being both in first place in August and mired in bankruptcy court, The Line has become a big scoreboard and court watcher.)
CMBS 2.0 Reps and Warranties Take Center Stage
For several months investment-grade bondholder, b-piece investor and special servicing (collectively, "investor") interests have been in the laboratory, working on a version of loan representations and warranties that protects their interests and cures the perceived ills of pre-recession CMBS loan underwriting. At the behest of the Commercial Real Estate Finance Council (CREFC), investor interests are now meeting with loan originator, loan seller and issuer (collectively, "issuer") interests to see if there is consensus for a set of so-called "model" reps and warranties. The notion is that issuers would be free to make whatever loan reps they chose, but would have to disclose differences between the model reps and theirs. There is an obvious negative presumption attached to reps that depart from the model set.
Ruthless
Fitch Ratings’ weekly U.S. CMBS Market Trends newsletter released today disclosed that CMBS loan delinquencies in June pushed the delinquency rate to 8.14% (Fitch Ratings’ delinquency index includes 2,962 loans totaling $35.9 billion that are at least 60 days delinquent or in foreclosure out of the agency’s rated universe of approximately 40,000 loans comprising $440.8 billion). June also marked the fifth straight month of loan resolutions in excess of $1 billion, as $1.5 billion of loans leaving the index in June helped to offset the $2 billion of new delinquencies.
The Line Reports from Andrews Kurth's Mid-Year Real Estate Roundtable - Part III: Vuvuzelas
In most soccer games there comes a moment, usually around the 60 minute mark, when tired legs and passionate fans recommit and reenergize for the final push. Depending on the country or stadium, that’s when the cheering, flare burning, singing, flag waving, or blowing of vuvuzelas intensifies and the teams rally.
The Line Reports from Andrews Kurth's Mid-Year Real Estate Roundtable - Part II: Examining Investor Expectations and the Increased Role of Government
Continuing our series of posts from Andrews Kurth's 2nd Annual Mid-Year Real Estate Roundtable on June 22...
The Line Reports from Andrews Kurth's Mid-Year Real Estate Roundtable - Part I: "Trophies and Train Wrecks": Distressed Asset Strategies and Opportunities
Andrews Kurth hosted its 2nd Annual Mid-Year Real Estate Roundtable on June 22. The panel included Lindsey Wright from special servicer C-III Asset Management, Trey Morsbach of the real estate services firm HFF (Holliday Fenoglio Fowler), Bert Crouch of Invesco, an institutional investor and pension advisor, and Andrews Kurth partner Pat Sargent, who is also the immediate past president of the Commercial Real Estate Finance Council.
Big Bambu
At the CRE Finance Council convention in New York this week, an exuberant band played at a networking cocktail party, economists reported upbeat data and issuers and originators boldly committed to start pushing money out the door. That was the good news. The bad news: the band members were moonlighting investment bankers and lawyers, the servicers didn’t share the same optimism and the uncertainty of regulatory and accounting reform still looms.