Real Estate Industry Seeks Softening of CMBS Risk Retention Rules
The CMBS market was supposed to be white-hot this year, and instead it has been ice cold for much of the year to date. Some of the main reasons involve volatility in global capital markets and the ripple effect of low oil prices, but another significant factor is CMBS investors’ concerns about loosening underwriting standards. And investors aren’t alone in worrying about risk: The federal government has weighed in, with a warning to lenders by several agencies and new risk retention rules imposed by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The question today is whether CMBS supply can keep up with borrower demand over the next two years if CMBS sponsors and bank lenders adopt more restrictive underwriting terms.