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Forum Spotlight: Servicers

March 20, 2023

Together, Stacy Ackermann, Leslie Hayton, Rich Carlson, Carl McLaughlin, Andrea Helms, Tony Yousif and Niral Shah form the “Leadership Working Group” for the Servicers and Special Situations Forum.  The group sets agendas and priorities for the Forum, as well as represents the constituency on CREFC’s Policy Committee.

What’s new:  In January, the forum debuted its new expansion as we combined the servicing administration and special situations forums. The Special Situations component newly incorporates the special servicing/special situations and distressed asset management as part of the forum.  The decision to evolve and formally combine servicing administration and special situations was due to feedback from members regarding current market conditions and related pressing issues that the members want to explore and address. 

The newly recast forum will have two sets of leadership – one representing servicing administration and the other representing special situations. Importantly, both sets of leadership will continue to work together to address all aspects of member interests and concerns.

Key Servicer Focus Areas

• Monitoring and tracking servicing activity 
• Transfers of interest and assumptions
• Distressed asset resolutions for securitized and portfolio assets
• Floating rate - transitioning away from LIBOR
• Collateral Valuation

What they’re saying:  Discussions at the January conference focused on the following points:

• Payoff efficiencies and success during 2022
• Increased defeasance volume – will it continue in 2023?
• Moderate uptick in transfers of interest and assumptions
• Increased requests for rate cap modifications and differences across portfolio vs securitized
• Continued valuation uncertainty  - impact on default resolution/enforcement and servicer advances
• Bespoke distressed asset resolution requests and approaches

Looking ahead, servicers are highly focused on current market conditions and the impact on maturing loans and default resolution and enforcement.  The forum leadership expects our forum discussions at the June conference to focus on the current state of the market and what servicers are seeing as “boots on the ground” with respect to the point of contact with borrowers.

 Key Policy Issues:

• SEC’s Conflicts of Interest in Securitization Proposal. The proposal would limit CMBS and CRE CLO sponsors from certain transactions in the first year after issuance. CREFC is asking for express exclusion for servicers from being treated as a “sponsor” under the regulation.
• LIBOR transition:  US Dollar LIBOR is scheduled to cease being published on a representative basis beyond June 30, 2023. Servicer Forum members and CREFC have published the CREFC LIBOR Legacy Playbook, which is designed to address operational issues related to transitioning floating-rate loans currently indexed to LIBOR to the recommended SOFR index plus the ARRC recommended spread adjustment or another contractually agreed-upon benchmark.

What’s Next:  Forum Leaders are seeking nominations for the next Chair Elect to join their leadership slate and look forward to presenting CREFC members with an update on their forum at the Annual June Conference in New York City.  Please send any nominations to Kathleen Olin.

To join the Servicing Administration and/or Special Situations Forums, please register here.  For any forum related questions, please contact Kathleen Olin.

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Meet CREFC's Servicers and Special Situations Forum Leaders - Stacy, Leslie, Rick, and Carl

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Forum Spotlight: Issuers 

March 6, 2023

Together, David, Jane and Dan form the “Leadership Working Group” for the Issuers Forum. The group sets agendas and priorities for the forum and represents the issuer community on CREFC’s Policy Committee.

Key Issuers Focus Areas

• Maintaining disciplined underwriting practices that account for today’s increased uncertainty around certain asset classes and today’s higher interest rate environment
• Navigating evolving preferences of investment-grade bondholders and B-piece buyers
• Restoring robust issuance of CRE CLOs while SOFR remains elevated and transaction volumes remain low
• Ensuring that we proactively manage regulatory changes and retrospectively evaluate previously implemented regulatory measures, such as risk retention, to determine if modifications are necessary

Looking ahead, CMBS and CRE CLO issuers are cautiously optimistic that more meaningful issuance returns in 2H23 as capital markets stabilize and issuers capitalize on increased borrower demand for shorter term, fixed rate loans. In the interim, we remain focused on improving transparency, liquidity, and performance with the goal of making CMBS more competitive and increasing market share.

Key Policy Issues:

• SEC’s Conflicts of Interest in Securitization Proposal: The proposal would limit CMBS and CRE CLO sponsors from certain transactions in the first year after issuance.
• Addressing a threat to 144A markets (15c2-11): An SEC application of 15c2-11 to fixed income could require public information disclosure on SASB and CRE CLO transactions starting in 2025.
• SEC’s Climate Reporting Rule: The final rule is expected imminently. While the rule will not cover ABS, the framework is expected to be a key standard for all climate reporting in the financial space.

What’s Next: Forum Leaders are seeking nominations for the next Chair Elect to join their leadership slate and look forward to presenting CREFC members with an update on their forum at the Annual June Conference in New York City.

To join the Issuers Forum, please register here. For any forum related questions, please contact Kathleen Olin (kolin@crefc.org).

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Forum Spotlight: Portfolio Lenders 

February 27, 2023 

Together, Stefanie, Chris, Michael, Jonathan, Scott and Lissette form the Leadership Working Group for CREFC’s Portfolio Lenders Forum. Importantly, this group sets the agendas and priorities for the Forum, as well as represents their constituencies on CREFC’s Policy Committee.

Key Portfolio Lender Focus Areas

• Valuation and Rates: Declines in valuation, higher interest rates and more disciplined underwriting (moderate rent growth and increased expenses). Higher rates and tighter coverage have led to more CM2 business across the board
• Lending Pipeline and Appetite: More capital available than second half of last year but volume still down. Transactions are limited due to the delta between sellers and buyers. Less interest rate volatility should help increase transaction volume. 
• Asset Management: Maturing transitional/bridge loans are facing refinance risk (increased cap costs, tight DY and DSCR metrics that don’t allow for a perm takeout). Office will have a hard time with little liquidity in the market and multifamily will see some hiccups as well as syndicated borrowers aren’t able to write the checks required for the pay down or extension costs.

What they're saying: Conversations at CREFC’s January conference focused on the availability and appetite of various debt capital sources (such as CMBS, GSE’s, debt funds, life companies and banks), and the impact of higher rates on risk ratings of loans in the portfolio and overall portfolio risk.

Key Policy Issues:

• Regulatory framework for ESG and climate change compliance and reporting
• Bank Capital Review
• SEC Climate Reporting
• Beneficial Ownership Reporting
• Multifamily reporting requirements under Home Mortgage Disclosure Act (HMDA)

What's next: Forum leaders are seeking nominations for the next Chair Elect to join their leadership slate and look forward to presenting CREFC members with an update on their forum at the Annual June Conference in New York City. 

To join the Portfolio Lenders Forum, please register here.  For any forum related questions, please contact Kathleen Olin at kolin@crefc.org. 

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Forum Spotlight: GSE/Multifamily Lenders

February 13, 2023 

Together, Emily, Kate, Bill, Alonzo, and Jason form the “Leadership Working Group” for CREFC’s GSE/Multifamily Lenders Forum. Importantly this group sets the agendas and priorities for the Forum, as well as represents their constituencies on CREFC’s Policy Committee.

Key GSE/Multifamily Lenders Focus Areas

• FHFA Scorecard: Affordable housing goals now based on percentage of total rather than absolute dollars
• Continued housing shortage and how the agencies can help; big “A” affordable
• Trends in agency credit underwriting and loan structures

What they're saying: Conversation at CREFC’s January conference focused on recent rent growth; panelists agreed 10%-20% rent growth is likely over for now, but that multi fundamentals remain solid. The pricing impasse between buyers and sellers remains, yet some semblance of market stability would bring increased transactions in the second half of 2023.

Economic volatility, specifically rising rates and record high cap costs, has motivated the agencies to get creative on shorter-term fixed-rate offerings:

• Five- and seven-year terms with flexible prepay options are gaining momentum
• Freddie Mac is issuing more single-property/single-pool securities (PCs); many with 5- and 7-year terms
• Fannie Mae also is seeing an increase in 5- and 7-year production; gaining popularity are loans with a 5-year term and 3-year yield maintenance structure

So far, investor demand has met supply, despite some investors at CREFC’s Miami conference expressing doubt about demand for short-term securities with wider windows.

Speculation persists on the fate of multifamily loans originated by debt funds and others in 2020-2022 given today’s higher rates and reduced liquidity. Conference goers discussed the potential necessity for mezzanine and preferred equity, rescue capital, distressed sales, or cash-in agency take outs.

Key policy issues:

• Addressing a threat to 144A bond market including SASB CMBS and CRE CLOs
• Advocating for a multifamily exemption from the revised Home Mortgage Disclosure Act (HMDA) multifamily reporting requirements.
• SEC’s climate reporting rule and other proposed regulations.
• Passage and implementation of the LIBOR Act for tough legacy contracts.
• White House initiated “Blueprint for a Renters Bill of Rights,” including some administrative actions by federal agencies, with the goal to increase and preserve affordable housing and to ensure that housing is safe and fair.

What’s next:  Forum leaders are seeking nominations for the next Chair Elect to join their leadership slate and look forward to presenting CREFC members with an update on their forum at the Annual June Conference in New York City.

To join the GSE/Multifamily Lenders Forum, please register here. For any forum related questions, please contact Kathleen Olin.

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CREFC Forum Spotlight: CMBS B-Piece Investors Forum

February 6, 2023 

Together, Lyndsay, Zach, and Jason form the “Leadership Working Group” for CREFC’s B-Piece Investors Forum. Importantly, this group — taking their cues from B-Piece Investor Forum members — sets the agendas and priorities for the Forum, as well as represents their constituencies on CREFC’s Policy Committee.

Key B-Piece Investors Focus Areas

• Ensuring that newly originated retail and office loans have adequate upfront capital reserves, hard lockboxes, and/or set deposits as lower DSCRs make it more challenging to collect significant TI/LC dollars monthly and for loans to withstand declines in tenancy.
• Watching upcoming maturities closely, as higher interest rates and wide bid/asks on the underlying assets are impacting exit strategies on refinances and sales, respectively.
• Evaluating potential five-year CMBS transactions cautiously, as these transactions require sterling credit characteristics, and are more sensitive to losses or extensions.

Looking ahead, leaders are hopeful that stabilizing rates will increase CMBS issuance relative to 2022. The Forum would like to continue the push toward better use of technology to improve the speed of reporting from borrowers to servicers and trustees to investors. In 2023, B-Piece investors see key challenges as:

• Today’s higher interest rates and their impact on borrower demand and refinancings,
• Enforcing rights in loan documents, such as springing lockboxes and “go-dark” sweeps, and
• Underwriting office loans as the sector continues to evolve.

What's next: Forum leaders are seeking nominations for the next Chair Elect to join their leadership slate and look forward to presenting CREFC members with an update on their forum at the Annual June Conference in New York City.

To join the B-Piece Investors Forum, please register here. For any forum related questions, please contact either the Forum Chairs or CREFC’s Kathleen Olin at kolin@crefc.org.

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B-Piece Investor Forum Leadership

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New CREFC Forums

January 9, 2023

In December, CREFC announced changes to its industry sector forums. These forums will debut on Monday, January 9th at the CREFC’s January Conference.

Why it matters:

• A new High Yield Investments/Alternative Lending Forum serves debt funds and others that comprise private lenders and investors in commercial real estate debt (whole loans, mezzanine loans, preferred equity, and sub-performing/non-performing loans).
• An expanded Servicers Forum aligns CREFC members focused on special assets and special situations.

The Alternative Lenders and High Yield Investors Forum will focus on the needs of this growing and important source of market liquidity. Alternative lenders now represent 15% to 20% of annual CRE lending activity.

Membership in this forum will include Alternative lenders and High yield investors in the CRE debt and equity space:*

• Lenders and investors include debt funds, public/private mortgage REITs, money managers, separately managed accounts (SMAs), and other public or private entities.
• Investments include bridge and mezzanine loans, preferred equity, and special/distressed situation opportunities.
• Third-party service providers and business partners who work closely with such lenders and investors.

Updated Servicers Forum

The HYDRA transformation shifts the Distressed Realty Assets (DRA) portion of HYDRA to the Servicers Forum. CREFC realigned the Servicers Forum to include two main focus areas:

• Servicing Administration
• Special Situations/Special Assets

The newly cast Servicers Forum represents market participants with separate leadership teams in the servicing of performing asset and non-performing/distressed assets, and include primary servicers and the GSEs.

The combined and expanded Forum creates a collaborative environment to focus on all servicing and trust administration issues within a single forum, while recognizing the diverse issues associated with servicing performing and non-performing loans.

CREFC Member Action Required: 

• Forum sessions at the January Conference will incorporate the new Alternative Lenders and High Yield Investors Forum, as well as the newly expanded Servicers Forum.
• Conference attendees will be asked at registration to make new forum selections based on their role in the industry and on which forums are of most interest to the member.
• Members not attending the conference can click here to sign up for a forum.

For any forum related questions, please reach out to either Lisa Pendergast or Kathleen Olin.

 * Does not include (is not intended to replace) lenders/investors that are served by the Investment-Grade Bondholders, B-Piece Investors, Portfolio Lenders-Bank, Portfolio Lenders-Insurance Company, or Issuer forums

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CREFC is expanding its Forums to better align industry interests.

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