CMBS 2.0: An Overview of Changes and Challenges
The Line is pleased to bring you an article from our esteemed colleague, Pat Sargent.
Capital Markets Overview
For over 20 years an increasing percentage of commercial real estate has been financed efficiently through the packaging of commercial mortgages into commercial mortgage backed securities (CMBS) sold into the capital markets. Issuance exploded in 2007 to over $230 billion, right before the broader economy imploded into the Great Recession, after which issuance plummeted: $12 billion in 2008, and a paltry $2.9 billion in 2009. In 2010, lenders returned to the market with issuance of a still anemic $12 billion. Yet investors made it clear they wanted more transparency, better underwriting and stronger alignment of risk. Thus began an effort to bring about changes that would encourage a return to the sector by investors as well as loan originators and issuers, led in part by the Commercial Real Estate Finance Council (CREFC), a key industry group composed of participants in all aspects of CMBS. Meanwhile, Congress, trying to address the economic catastrophe, passed the Dodd-Frank Act in July of 2010, calling for significant financial market regulations and studies. The new and evolving changes in the market for CMBS, which include self imposed industry standards and implementation of legislative and regulatory mandates, are referred to as CMBS 2.0.
Model Representations and Warranties and Dispute Resolution in CMBS 2.0; Rule 17g-7
The Line is pleased to bring you an alert from our esteemed colleague, Pat Sargent.
Representations and warranties by loan sellers/originators concerning characteristics of commercial mortgage loans have been a component of commercial mortgage backed securities (CMBS) since inception. While significant and important in transactions through 2007 (so-called CMBS 1.0), these representations and warranties have become a central focus of investor and regulator attention in CMBS 2.0.
The Line Reports from The Trigild Conference: Special Servicing Perspectives
Kevin Donahue of Midland Loan Services moderated a panel of special servicers from Wells Fargo, Berkadia, Situs and KeyBank to discuss the state of the industry amid signs that "extend and pretend" policies are themselves in transition.
The Line Reports: Jones Lang LaSalle's 2010 Market Review and Forecast
We are frequently reminded how globally interconnected our economy has become. With that in mind, Jones Lang LaSalle's annual conference on real estate markets opened with Rebecca Patterson, Global Head of Foreign Exchange and Commodities at J.P. Morgan, providing a whirlwind tour of the domestic and international economy. Her observations are paraphrased below:
The State Law Impact Project - Part 3
Co-written by Kathleen Tarbox
Though it's been awhile, we previously discussed our survey of state laws regarding various foreclosure-related issues.
In this post we'll wrap up our discussion of the State Law Impacts Project with various graphs depicting our findings.
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.
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.
The Line Reports from the CRE Finance Council Conference: Distressed Asset Investors "Back on Offense"
Panelists from Brookfield Real Estate Financial Partners, Eastdil Secured, The Blackstone Group, Oaktree Capital Management and PCCP surveyed the state of the distressed asset market and the motivations of buyers and sellers.
Hot Topics in CMBS Loan Servicing (and Some Thoughts on Document Drafting for CMBS 2.0)
With this post I've decided to take a discussion from the MBA Servicing Conference last week ("Hot Topics in CMBS," which included panelists from CWCapital, KeyBank, Principal, Moody's and Situs and focused on current servicing problems associated with CMBS loans) and examine loan documentation, particularly what CMBS 2.0 has to correct.
