Search
 

The Real Issue For CMBS

How FinReg will constrain CMBS lending. The Maxine Waters quota discrimination clause.

By Joel Ross | Updated on July 19, 2010

The 5% holdback will be manageable. Other issues will get worked through. The real problem is the rating agencies. Before FinReg was passed, there were monitors recently appointed at the agencies to watch over every aspect of the underwriters and other areas. There is a whole new layer of oversight. That was bad enough. Now FinReg has mandated that the agencies can be held liable for damages due to their ratings. This is the tort lawyers full employment act. There is no jury I have ever seen that is capable of even understanding how ratings work or how underwriting is done. Claiming to a jury that the agency should have known or should not have issued the high rating will not be hard to claim and almost impossible to defend after the fact.

Here is the result. The agencies have become ultra conservative. If you look at what has been approved so far it is only the best quality deals at reasonable leverage. They have been one asset or several high quality assets, but not anything else. While there will be future deals with more smaller loans and probably lesser quality than what was done thus far, the quality will still be high. The days of wide open conduits is over for at least several years.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2024 ALM Global, LLC. All Rights Reserved.