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.
Click here to view the full article.
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Categories: Corporate, Economic Recovery and Government Opportunities, Real Estate, Structured Finance and Securitization
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.
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Categories: Corporate, Economic Recovery and Government Opportunities, Real Estate, Structured Finance and Securitization
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.
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Categories: Conference Updates, Corporate, Economic Recovery and Government Opportunities, Real Estate, Structured Finance and Securitization
Moving Forward
Over the past year, we have looked far and wide for answers to how we got in this real estate finance and capital markets mess and how to get out of it. We have listened to real estate industry leaders and economists. We have examined rating agency delinquency reports and downgrades. We have looked for comparative solace from the experience of the Dust Bowl, the carnage of the First World War and the 1980s bust. We have even consulted with Dr. Strangelove, Ferris Bueller, and Willy Loman.
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Categories: Corporate, Economic Recovery and Government Opportunities, Real Estate, Structured Finance and Securitization
Whose Claim Is It Anyway? The CWCapital Case Explains the Role of a Servicer
The Line welcomes back 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.
On more than one occasion, clients have described the creation of mortgage-backed securities not as a delegation of authority by one party to another, but rather as a “coming to the table” by the issuer, master servicer, special servicer and trustee to assume discrete roles. As a result, CMBS players look to the Pooling and Servicing Agreement (PSA) to define their responsibilities, and give little thought to whether there are common-law duties inherent in the servicer/trustee relationship.
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Categories: Corporate, Economic Recovery and Government Opportunities, Real Estate, Structured Finance and Securitization
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:
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Categories: Corporate, Economic Recovery and Government Opportunities, Real Estate, Structured Finance and Securitization
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.
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Categories: Corporate, Economic Recovery and Government Opportunities, Real Estate, Structured Finance and Securitization
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.
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Categories: Corporate, Economic Recovery and Government Opportunities, Real Estate, Structured Finance and Securitization
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.
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Categories: Corporate, Economic Recovery and Government Opportunities, Real Estate, Structured Finance and Securitization
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.
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Categories: Corporate, Economic Recovery and Government Opportunities, Real Estate, Structured Finance and Securitization
