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CRE Finance World, Summer 2014

Other Highlights Since January CREFC Testifies to House Subcommittee. In February, CREFC past-Chairman Paul Vanderslice delivered prepared remarks to a House Financial Services Subcommittee (Capital Markets and GSEs). Chairman Scott Garrett (R-NJ) has been a stalwart supporter of efficient and liquid CRE markets. Vanderslice was invited by the Chair to speak to the treatment of asset-backed securities — specifically CMBS — under the 2013 risk retention reproposal. Vanderslice highlighted the importance of CMBS in financing all types of income producing properties, both commercial and multifamily. He noted that in 2013, CMBS provided almost 25% of all commercial real estate financing — over $80 billion — and in 2013, CMBS provided 34% of all commercial real estate loans to tertiary markets and 24% to secondary markets; far more than any other lending sector. CREFC has worked hard delivering this message of democratizing institutional capital in every congressional district. Vanderslice added that CREFC has submitted a comment letter to regulators outlining our support for the objectives of risk retention but urged regulators to allow flexibility and optionality in how the retention requirement is achieved. CREFC projects that the risk retention rule, as re-proposed, will impose a cost on borrowers between 40 to 50 basis points. This translates into an increased cost burden on commercial property owners of 8 to 10 percent at today’s spreads. CRE Finance World Summer 2014 16 Regulatory Update Risk Retention appears to be stalled again. We hear regulators are again at odds over how to define Qualified Residential Mortgages (QRM). Since the residential mortgage finance is an election issue, the later this slips, the more likely it could be pushed past the election. CREFC has been active, however, in our engagement with regulators on this topic. We have submitted supplementary comment letters to the rule-writers on topics such as single borrower, single credit deals and qualified commercial real estate (QCRE) loans. To read these, please visit our website’s Document Resource Center, under the Government Relations section. Basel III. Back in March, CREFC filed a follow-up letter to a meeting held with the joint agencies (Fed, OCC, FDIC) and other real estate trade associations answering requests for recommendations regarding treatment of certain special purpose vehicles and commercial real estate loan facilities under the proposed Basel III liquidity coverage ratio (LCR). The LCR and another liquidity ratio to come, the Net Stable Funding Ratio, will complement the riskbased capital rules in addressing weaknesses identified during the crisis in bank balance sheets. The proposal was particularly punitive in its treatment of securitizations. Reg AB. The SEC opened up a small segment of the proposal to further comments. A memo released outlined the agency’s objectives in placing certain potentially sensitive asset-level data behind a credentialed login on a non-public website. This comes in response to several commenters raising concerns with sensitive or private information such as borrowers’ FICO scores, addresses and income being available on the agency’s public EDGAR website. CREFC submitted detailed comments which are available on our website. In a recent meeting with a SEC Commissioner, it was suggested to CREFC that Reg AB could precede the Risk Retention rule due to the agency focusing on disclosure and reporting. Mid-Year 2014 Legislative and Regulatory Update


CRE Finance World, Summer 2014
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