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CRE Finance World, Winter 2012

The Washington Minute: 2012 Will See Finality to Many “Dodd-Frank” Rules •Regulatory: CRE Finance Council responded to the regulators •Conflicts-of-Interest Rule: The SEC’s proposed rule is principles’ with recommendations on how to improve the proposed rules based, and works to mitigate material conflicts of interest between that would fit the “Dodd-Frank” mandate and still allow for an ABS issuers and investors. Will the final rule, expected in the economically viable CMBS marketplace. We continue to meet second quarter of 2012, allow for workable CMBS transactions? with the regulators on a regular basis to provide the data and information necessary to come up with workable solutions. •SEC’s ABS Exemptions: The SEC is studying whether it should modify its exemptions for REITs and ABS issuers under the •Legislative: CRE Finance Council continues to present to Congress Investment Company Act, which distinguishes both from investment its views on the proposed rules and to make sure they are aware companies. Will the exemptions be modified in a way that will of our views as they oversee “Dodd-Frank” implementation. As part affect CMBS? Both the REIT study and ABS proposed rule are of that effort, in 2011 we testified before both the House Financial expected to be redefined in 2012. Services and Senate Banking Committees. Furthermore, we were successful in lobbying Financial Services Committee Chairman •Basel III Capital Standards: Basel III calls for increased capital Spencer Bachus (R-AL) to warn regulators of the danger of ratios for the world’s largest banks. However, buried in the implementing the PCCRA. standards are higher capital levels for securitization, including the application of a 1250% risk weight for certain lower-rated and Regulation AB Reforms unrated tranches, and risk haircuts for securitization exposures CREFC responded in July to the SEC’s re-proposal of portions of when calculating capital related to market risk. The questions its Regulation AB reforms. Regulation AB sets forth the disclosure include how U.S. regulators interpret the Basel III standards and and compliance requirements for shelf eligibility for asset-backed how they will be implemented. While the deadline is not until securities. Specifically, CREFC provided input in four key areas: 2018, rulemaking may start as early as next year. •Certification either by the CEO or an executive officer in charge GSE Reform of the securitization regarding both the disclosures within the GSE reform remains one of the most politically-charged issues, prospectus and the design of the securitization; and the coming elections could impact this priority as much as any issue before Congress. •The appointment of a “credit risk manager” to review the underlying assets upon triggering a repurchase request; The Administration last January released an eagerly anticipated roadmap for housing finance. While the plan did not provide any •Inclusion in ongoing reports of any investor requests to be specific proposal, it did offer three general options for reform, communicated with other investors; and ranging from keeping the GSEs largely in place to creating a privatized market where a guarantee could be purchased from private entities •Repurchase request dispute resolution procedures. for certain types of loans. Such a strategy suggests that the White House is willing to compromise within a certain range of options. The SEC is expected to release final rules that align with the risk-retention rules, which we would expect in the first quarter Unfortunately, that strategy leaves the legislative challenge in of 2012. CREFC is continuing to work with the SEC to ensure the hands of a divided Congress, and to this point little has been that our members’ recommendations are taken into account in accomplished. The Senate, outside of a litany of hearings, has yet the final rulemaking. to take any substantive action or produce a GSE reform bill. The House, meanwhile, has released eight bills that work to wind down Further Regulatory Reforms Fannie Mae and Freddie Mac in their current state. We expect many other regulatory actions to be finalized in 2012 and we will keep you updated as they progress. The main focus In May, in a rare show of bipartisanship, Congressmen John Campbell of our attention will be in the following areas: (R-CA) and Gary Peters (D-MI) introduced a bill that would replace Fannie Mae and Freddie Mac with at least five private companies •Volcker Rule: When the final rule is released, expected in the that would issue mortgage-backed securities with explicit federal third quarter of 2012, will it still exclude securitizations from the guarantees. These new entities would operate similar to public ban on proprietary trading? utilities and would be restricted to buying loans that meet certain standards, including size caps. A publication of Winter issue 2012 sponsored by CRE Finance World Winter 2012 67


CRE Finance World, Winter 2012
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