Earlier this week, Housing Wire commented on a Moody’s report that covered bonds (finally) are receiving serious consideration as a very viable structure for the US real estate finance market.

Housing Wire summarized the report as follows:  "More banks based in the United States will establish covered bond programs to fund future mortgages on the perception of less risk and still lingering uncertainty over private and agency securitization markets."

Periodically, I bang the drum about the importance of covered bonds.

While there are serious issues to address, such as protecting the mortgage bond pool from creditors and liquidation by the Government upon the failure of the bank . . .

. . . I still stand by this comment made by me in December of ’09: "Covered bonds are our ultimate destination for a capital markets solution that includes the middle majority of the CRE market."

The current slump or "pause" in the CMBS market only supports this perspective.  We need to get to work on alternative structures or ways to bring public funds into the commercial real estate finance market.

Covered bonds are the structure.

  • do you see it the same way?

Please comment below.

 

One outcome from the Ibanez case: comments made by Yves Smith at Naked Capitalism and by Adam Levitin at Credit Slips are now receiving renewed attention:

In Texas, several years ago we saw the "chain of title" hurdle coming for real estate debt securitizations – and as a result, Texas has a statutory provision giving a mortgage servicer (or an attorney authorized by the servicer) the legal authority to appoint a substitute trustee(s) to "succeed to all title, power, and duties of the original trustee."  (Professor Levitin, how would that fix play-out in Massachusetts?)

Separate and independent from the merits of other comments made by Smith or Levitin, all of this points to:

  • the need for state legislation addressing the chain of title problem (similar to the Texas fix); and
  • the need for Federal legislation in crafting CMBS 2.0

And any Federal fix needs to be two-pronged:

  • address CMBS transparency, practices, process and questions (on a going-forward basis) for CMBS 2.0
  • add covered bonds as a capital markets product

As I’ve noted previously, covered bonds need to be in the mix.

If you have any comments or suggestions, please post them below.

(This is the third posting in a series on this topic) (first posting; second posting)

The United States Covered Bond Act of 2010 (H.R. 5823) is out of committee in the House, and today the Senate Banking, Housing & Urban Affairs committee will hold a hearing on covered bonds.

Yesterday, the following industry organizations (as they have done on other issues and legislation important to commercial real estate finance) sent this letter Committee Chairman Chris Dodd (D-Conn.) and Ranking Member Richard Shelby (R-Ala.) in support of covered bonds as a financial product in the US financial markets:

American Land Title Association
American Resort Development Association
Appraisal Institute
Building Owners and Managers Association International
Commercial Real Estate (CRE) Finance Council
International Council of Shopping Centers
NAIOP, the Commercial Real Estate Development Association
National Apartment Association
National Association of Real Estate Investment Managers
National Association of Real Estate Investment Trusts
National Association of Realtors
National Multi Housing Council
The Real Estate Roundtable

The letter, of course, does a nice job of articulating the need for covered bonds.

As I’ve noted, I view covered bonds as a "must have" product for the US commercial real estate finance market.

So, as the Senate now starts its process, here are a few high-lights of the House Bill:

What Assets Can Be Included In A Covered Bond Pool?

  • Eligible asset classes for cover pools include residential and commercial mortgages, public sector loans and small business loans
  • Covered bond regulators may jointly designate other eligible asset classes

What Are Some Provisions That “Protect” Investors?

  • establishes minimum requirements for over-collateralization, monthly reporting, and an asset coverage test
  • if an issuer defaults, it creates a mechanism for transferring the pool to a new, separate legal estate, which would be administered for the benefit of investors so as to continue making scheduled payments over time (with liability protections for the pool administrator)
  • preserves investors’ potential deficiency claims against an issuer’s estate, allowing investors to make those claims in the future if the cover pool turns out to be insufficient
  • some believe that this wind-down approach avoids market value risk better than in the current system, where investors are exposed to the risk of having to liquidate the entire cover pool in the market with a short period of time following issuer default

Who Will Issue Covered Bonds (AND Be The Lenders)?

  • any insured depository institution or subsidiary thereof, any bank holding company or thrift holding company or any subsidiary thereof, and any non-bank financial company that is approved by its primary financial regulatory agency

Who Will Regulate The Bond Issuers?

  • a consortium of federal regulators, including the OCC, FDIC, FRB and the SEC, with a two-fold approach:
    •  these regulators will promulgate joint rules dealing with covered bonds
    •  the primary regulator of the applicable financial institution enforcing such rules.

As I continue to follow this topic, I’ll address some of the "pros" and "cons" about the House Bill.

If you have other information on covered bonds, please post a comment below. 

(This is the second posting in a series on this topic) (first posting)

Now that the United States Covered Bond Act of 2010 (H.R. 5823) is out of committee, covered bonds are attracting interest of the broader financial services community.  I view covered bonds as a "must have" product for the US commercial real estate finance market.

So, more of you are asking . . .

Can you give me a quick description of covered bonds?

Brief Description: A covered bond is a recourse debt obligation of the bond issuer (where the bond issueroriginal lender has a continuing interest in the performance of the loans), which is secured by a pool of assets (such as commercial mortgages). The holders of the bond are given additional protection in the event of bankruptcy or insolvency of the issuing lender: the pool is NOT included in the bankruptcy or insolvency action.

Moody’s Summary of Covered Bonds: While Moody’s has been covering EU covered bonds for years, it  has not attempted to educate the US investor market on covered bonds. Recently, however, it issued a short (5 pages), plain language, well-written guide to covered bonds.  Although Moody’s “A Short Guide to Covered Bonds” appears to be available upon payment of a fee, the Covered Bond Investor gives us the subheadings in the guide:

  • Covering the Continent Since 1789: A Default-Free Success Story by Any Name
  • What Makes a Bond "Covered"?  – A Quick Course in Dual Recourse
  • Benefits to the Covered Bond Investor
  • Benefits to the Covered Bond Issuer
  • How Covered Bonds Compare to Mortgage Backed Securities
  • Covered Bond Risks and Moody’s Rating Approach
  • Four Main Drivers of a Moody’s Covered Bond Rating
  • Is the Time Ripe for U.S. Covered Bonds?

Clearly, Moody’s is getting the market “ready” for a covered bond product in the US – undoubtedly with an eye toward the passage of H.R. 5823.

Perry Hill Summary of the Moody’s Report: Edward Murphy at the Economic Legislation blog gives us a nice description of the typical attributes of statutory covered bonds. 

Here is his description of the four basic elements of covered bonds, when created by statute:

  1. the bond is issued by (or bondholders otherwise have full recourse to) a credit institution that is subject to public supervision and regulation;
  2. bondholders have a claim against a cover pool of financial assets in priority to the unsecured creditors of the credit institution;
  3. the credit institution has the ongoing obligation to maintain sufficient assets in the cover pool to satisfy the claims of covered bondholders at all times (this is the "skin in the game" component that is the topic of some debate on the CMBS loan product); and
  4. in addition to general supervision of the issuing institution, public or other independent bodies supervise the institution’s specific obligations to the covered bonds. 

Other good resources exist for a description of covered bonds, including the Covered Bond Investor.

In the next couple of postings, I’ll cover some of the pros and cons of covered bonds.

If you have other helpful summaries of covered bonds, please post them below.

Recall that on July 28, the US House of Representatives Financial Services Committee approved H.R. 5823, the “United States Covered Bond Act of 2010,” which now is on the floor of the House for a vote (but not yet scheduled for a vote). This means that legislation on covered bonds (H.R. 5823) is currently eligible for further consideration and a possible vote by the full House of Representatives in this Congressional term.

My perspective is that covered bonds will be an important and fundamental product for the much-needed, “new middle-tier” CREF lender position on the finance spectrum, as described by me in anther posting (see my “call” for this new group of lenders).

I’ve offered up at least 5 reasons “why” covered bonds are a viable structure and an important product for bringing liquidity into the commercial real estate market.

So, how can you “follow” H.R. 5823 and if passed into law, will banking regulations need to be changed?

How To “Follow” H.R. 5823?

The Internet and my favorite technology tool (Google Reader) make it easy to follow the legislation and to learn about covered bonds. Here are my suggestions:

If Passed, Will Bank Regulations Need To Be Changed?

In addition to needing new legislation, implementing covered bonds will require change in some features of American banking regulations   The FDIC already has addressed this issue: covered bonds could affect potential recovery for the Federal Deposit Insurance Corporation (FDIC) when a bank fails. In 2008, the FDIC issued Financial Institution Letter (FIL)  FIL 73-2008, which clarified its obligations to the holders of covered bonds if an FDIC-insured institution is placed in FDIC receivership or conservatorship.  Of course, other bank regulations probably also will need to be changed.

This is the first in a series addressing covered bonds.  With H.R. 5823 out of committee, and with an economy that continues to limp along, covered bonds probably will become a reality for us.  It is time to understand them, so that we can use them as one way to lift out of these troubled times.

If you have other resources addressing covered bonds, please tell us about them below.

As an asset class, commercial real estate typically requires some level of financing.  With all of the problems and challenges facing CMBS, there is a need for what I call a "new class" of commercial lender for commercial real estate.  And this new class of lenders should have the ability to issue covered bonds.

Unfortunately, covered bonds were a financial product NOT included in the Dodd-Frank financial reform bill (the Wall Street Reform & Consumer Protection Act).  

Fortunately, last week the House Financial Services Committee started consideration of the "United States Covered Bond Act of 2010" (H.R. 5823). Briefly, the bill gives financial institutions (or a holding company) the ability to issue securities backed by a pool of assets (such as commercial mortgages) held on the bank (or holding company) balance sheet.

The bill quickly attracted the support of key industry organizations:

  • the Commercial Real Estate Finance Council (CREFC) (letter)
  • Securities Industry and Financial Markets Association (SIMFA) (press release)
  • American Securitization Forum (ASF) (press release)

Importantly, the covered bond structure allows the lender the ability to "swap out" a good loan for a non-performing loan – which is a feature that allows the lender to mitigate these two important credit enhancement (or recourse) features of covered bonds:

  • the issuer is on the hook for losses in the pool; and
  • the assets remain on balance sheet of the issuer (but they are protected against the bankruptcy or insolvency of the issuer)

If this bill becomes law, then we should see a new source of capital for commercial real estate: specialty financial institutions that lend in identifiable asset classes, resulting in greater liquidity for those asset classes.

While the initial feedback is that covered bonds may be more expensive than CMBS (or RMBS), here are a few reasons "why" covered bonds make sense as another capital source for commercial real estate:

  • some commercial borrowers have fundamental problems with CMBS loans (and this group could be growing in number) – however, this problem evaporates with the ability of the issuer to withdraw a troubled loan from the pool (by replacing it with a performing loan), which is exactly the type of action that a commercial borrower will find to be very, very attractive (in that a borrower [and even a rational lender] may want the ability to restructure a distressed debt in ways that the CMBS structure does not allow)
  • investors will find this "swap out" feature to be an attractive alternative to the CMBS "skin in the game" approach (surely an investor will like a swap out as opposed to the limited skin in the game approach under a CMBS model); this mechanism should allow the investor to focus on the financial standing of the issuer (much like it would in buying stock in a mortgage REIT or an equity REIT) instead of specific loans in a CMBS pool; the result should be excellent acceptance of the covered bond product by investors (and perhaps at the expense of the CMBS market)
  • rating agencies seem to have fundamental problems with accepting liability for their mistakes; which points to a need to have a "risk retention" feature in any securitization structure that is stronger than CMBS risk retention approach; and covered bonds have this stronger feature
  • surely the accounting and other rule changes will increase the costs of CMBS issuances
  • the US needs this product to compete with the well-developed European version of this product

QUESTION: are you seeing this differently?

Please post your comments below.

 

 

Here is an up-date from the CREF-C on the joint committee charged with reconciling the House and the Senate financial reform bills.

The summary focuses on three topics:

  • risk retention in CMBS deals
  • FAS rules 166 and 167
  • covered bonds

The CREF-C up-date:

To begin, House Chairman Barney Frank (D-Mass.) presented a "House offer" that would significantly alter the risk "retention" provision, including language in both the House and Senate-passed bills that recognizes the unique nature of the commercial mortgage market.

Senate Chairman Chris Dodd (D-Conn.) counter-offered by accepting most all of the House offer, but Senate conferees explicitly rejected the House request to strike Senate-passed amendments offered by Sen. Mike Crapo (R-Idaho) related to "commercial mortgages" and by Sen. Mary Landrieu (D-La.) to create a "qualified mortgage" exemption. The risk retention provision remains outstanding, as negotiators try to break the stalemate and reach agreement on the final provision.

Separately, the Conference Committee adopted an amendment offered by Rep. Scott Garrett (R-N.J.) that would require financial regulators to examine and report on the combined impact of new accounting standards (FAS 166 and 167) and other regulatory changes (such as a "retention" mandate) on credit availability, prior to any rulemaking. Under the provision, the Federal Reserve (working with other agencies) would have 90 days to report its findings to Congress with recommendations on statutory and regulatory changes that could be made to lessen the impact on credit availability.

Lastly, House conferees passed another amendment by Rep. Garrett that would provide a statutory framework to facilitate a U.S. covered bond market, which explicitly includes commercial mortgages and CMBS as forms of eligible collateral. The "House offer" on covered bonds – which is supported by Sen. Bob Corker (R-Tenn.) – is now being considered by Senate conferees, as well as financial regulators (Treasury, FDIC, and others) that have raised questions about its execution.

The Conference Committee meets this afternoon to consider these and other items. Conferees hope to conclude their work to reconcile the two bills this week, at which time any Conference report would need final approval by the House and Senate.

 Stay tuned.

The tentative time line for the House-Senate reconciliation conference committee covering the financial regulatory reform legislation is the following: begin to meet during the week of June 7, 2010, with the goal of having a final Bill ready for the President’s signature by the July 4 recess.

With that quick time line in mind, here is a quick up-date on:

  • High-level comparisons of the House Bill and the Senate Bill
  • The membership of the House-Senate Reconciliation reconciliation conference committee
  • Last hope for inclusion of covered bonds in the final bill

Comparisons of the House Bill and the Senate Bill:
As you know, the two bills are very, very long.  And I’m sure that some where in DC, Congressional staffers are preparing a detailed comparison of the two bills (as part of the reconciliation process). So, we’ll have that good comparison shortly.  In the interim, here are high-level comparisons by the Associated Press and by PBS.

Membership on the Reconciliation Conference Committee:
Here is the list of the Senators on the conference committee (8 Democrats and 5 Republicans; eight members of the Banking Committee and five from the Agriculture Committee):

  • Tim Johnson (D-SD)
  • Jack Reed (D-RI)
  • Chuck Schumer (D-NY)
  • Chris Dodd (D-CT)
  • Blanche Lincoln (D-AR)
  • Tom Harkin (D-VT)
  • Pat Leahy (D-VT)
  • Dick Shelby (R-AL)
  • Bob Corker (R-TN)
  • Michael Crapo (R-ID)
  • Judd Gregg (R-NH)
  • Saxby Chambliss (R-GA)

And here is the list of 8 Democratic Representatives proposed for inclusion on the committee by Representative Barney Frank (D-MA) (I have not seen a list of the 5 Republicans to be named by him):

  • Barney Frank (D-MA)
  • Carolyn Maloney (D-NY)
  • Paul Kanjorski (D-PA)
  • Luis Gutierrez (D-IL)
  • Maxine Waters (D-CA)
  • Melvin Watt (D-NC)
  • Gregory Meeks (D-NY)
  • Dennis Moore (D-KS)

No doubt, this list will be finalized in the next week.

Final Hope For Covered Bonds: As noted by the Covered Bond Investor and by CNBC, the U.S. Covered Bonds Act (introduced in the House by Scott Garrett [R-NJ] and co-sponsored by Spencer Bachus [R-Ala.] and Paul Kanjorski [D-Pa.]) did NOT make it into the financial reform bills passed by either the House or the Senate.

Both of these blogs note that the following is the only hope for covered bonds becoming part of the final financial reform bill:

  • The appointment of Representative Garrett, Bachus andor Kanjorski onto the House-Senate conference committee
  • And then their ability to convince the committee to add the covered bond bill into the compromise bill adopted by the committee

So, with Representative Dodd’s appointment of Representative Kanjorski to the committee, covered bonds still might be part of a solution to the credit crisis, and a viable product in the U.S.— if he can convince the committee to add covered bonds into the final bill.

As I’ve noted before, my perspective is that covered bonds need to be included in the financial reform bill—simply because the new CMBS 2.0 will not be sufficient to meet the credit needs of the commercial real estate finance industry.

If you see it differently or have additional information, please post a comment below.
 

James Ruiz recently wrote a piece, published in the Texas Lawyer, summarizing the February 10, 2010 report (“Commercial Real Estate Loses and the Risk to Financial Stability”) issued by the Congressional Oversight Panel. (continue reading link below). It is a good summary of the Panel’s perspective of the credit problems in commercial real estate, and addresses the REMIC issues inherent in modifications of CMBS loans and the impact of two new accounting standards (Statement of Financial Standards 166 & 167).

Earlier, I posted a summary of the report, and commented that if financial reform is going to occur, the window is narrow given the August start of the mid-term Congressional re-election campaign season. As you might know, I’have been bloggingfollowing the Restoring American Financial Stability Act of 2010 [link] as it makes its way through the Congressional process. 

It’s time to step back and ask the all-important questions: so what does all this mean? What is the big-picture? Where is this going?

Here’s my list of some of the answers to those important questions:

  1. The Good: ‘Return’ of the unregulated CRE lenderr. in the near future, unregulated lenders will play a very important role in CRE finance. This will mean new opportunity from a new source.
  2. The Bad: ‘Extend and Pretend’ and More Defaults. This will mean continuing opportunity for special servicing and asset management – but the RTC is not the model.
  3. The Uncertain CMBS 2.0: Practical and important structural challenges abound before the new CMBS (“CMBS 2.0”) will include pools of loans from multiple borrowers, in amounts that will have a meaningful impact on the CRE finance market.
  4. The Not Now For Covered Bonds: the current focus is on CMBS 2.0, although covered bond legislation was introduced by members of the House Financial Services Committee – Capital Markets Subcommittee. Why isn’t’t this legislation getting more attention?

Based on this list, the next 2-4 years will look like this: CRE finance = Good+Bad.

Yes, we’ll have good and bad at the same time (with more of the later in the near-term).

Let me briefly explain:

#1. “Unregulated Lenders” Will Play An Important Role In CRE Financee: By this phrase, I mean lenders who are not banks, savings and loans, credit unions, insurance companies or government sponsored entities (such as Fannie Mae). In addition, these lenders will be different from “hard money” or “hot money” commercial lenders, who as lenders of last resort offer loan terms that resemble predatory lending.

Instead, these lenders will be mortgage REITS and other lenders whose base or core sources of funds are not the Federal Reserve, insurance premiums or Federal Government sponsorship (which I call the “traditional sources of CRE finance”). The pricing and terms will be more favorable to the borrower than offered by the "hard money" or "hot money" lenders, and more expensive than terms than offered by traditional sources of CRE finance. In my description of this middle-tier CRE finance group, I’m thinking of mortgage REITs such as CreXus and of mortgage finance companies like the former Lomas & Nettleton.

What leads me to this conclusion?

  • One study reports that traditional sources of CRE finance only offer @ $200Bill of funds annually for CRE lending (based upon a recent three year average of loan originations by this group).
  • The same study shows that CRE lending needs for maturing debt will exceed this amount by a total of $500Bill in 2010, 2011 & 2012.
  • This “funding gap” doesn’t’t take into account funding for defaulted CRE loans (by way of financing purchases of notes and REO from lenders and servicers). So, the gap really is larger than $500Bill

    What will be the source of funding to “fill” this gap?
     

  • CMBS 2.0 will not fill this funding gap any time soon. True, banks and life companies are forming CMBS 2.0 programs – and we’re working on several of them. However, at the CMSA January conference, in an informal poll of investors, 58% of the investors believed that “CMBS 1.0” style multi-borrower, fixed rate pools will be return no sooner than 2012 (or even later); and 69% of the investors believed that annual new CMBS issuances would not exceed $100bill until 2013. (click on this link to my blogs from the conference for more information; andor search TTFL blog using the term “CMSA” for more information.)  The message is simple: CMBS 2.0 probably is not a near term reality for multi-borrower loan pools in an amount necessary to close this gap  – which also is why the new CMBS 2.0 programs will be underwriting loans as if they were going to hold them on their books – and not sell them in a securitization.
  • Bank CRE lending will not fill the gap for several reasons:
    –  Banks credit allocations for CRE will decrease for the near term (my guess: 3-5 years). Recently, the US Controller of the Currency spoke at the annual convention of the Independent Community Bankers of America, and called on policymakers to devote special attention to the CRE lending concentrations at banks. He then suggested a lengthy list of options, all of which would reduce lending risks AND result in less capital available for CRE lending.  Regional and community banks have high CRE loan concentrations.  For example, I’ve been told that the CRE lending concentration for banks governed by the Dallas Federal Reserve Bank is @ 26%. Simply too, too much CRE loans on the bank portfolios.
    –  The Wall Street Journal reported on March 15Th that in the coming weeks, the Financial Accounting Standards Board is likely to propose that banks expand their use of market values for financial assets such as loans (called “mark-to-market”). If these accounting rules are implemented, then this will be another pressure on banks to make less capital available for CRE lending.
  • Insurance company CRE lending will not fill the gap. Recently the Capital Adequacy Working Group of the National Association of Insurance Commissioners (“NAIC") voted to release for comment a proposal that might result in a large increase to the risk-based capital (“RBC”) charges for life company holdings of CRE mortgages.   If passed, this could significantly restrict the ability of some life companies to make capital available for CRE lending.

All of this points to opportunity for a new niche CRE lender.

#2. Extend and Pretend AND More Defaults:  as noted in our postings on the October 31, 2009 bank regulatory announcement, and at the CMSA January conference, the regulatory plan clearly is to avoid taking back CRE collateral if it has some reasonable basis for keeping the loan current. Many people, myself included, called for a quick RTC style take over of failed banks, with a quick disposition of the assets. Clearly, absent a change in the mark-to-market rules (described above), the perspective of the administration is that the current CRE crisis is NOT attributable to over building. Instead, it is a credit crisis unrelated to CRE. So, the plan seems to be extend until the fundamentals for the broader economic recovery firm up as evidenced by: increases in employment; improvement in consumer confidence and spending; etc.  In other words, treat the source of the problem, and not the symptoms.

However, default rates on CRE mortgages continue to climb (see my earlier posting).

So, unless and until we clear much of the over-leveraged CRE from the market (my “sub-prime commercial” product type), if you have expertise in distressed CRE, then you should be busy.

And, if your company can handle both the good AND the bad, then you’ll really be busy.

In the near future, I’ll cover #3 and #4.

If you have any questions, comments or suggestions, please post your comments below.

Continue Reading CRE Financial Reform And Market Trends: Opportunity For New Lending But More Extend & Pretend As Defaults Grow

Once again [link to earlier letter], in a letter dated March 25, 2010, the 21 key industry groups band together in an attempt to focus the Senate on the importance of the securitization market, and to caution the Senate on the proposed reforms relating to the securitization market. The players in this group represent an extremely broad segment of the US economy:

  • American Bankers Association
  • American Hotel & Lodging Association
  • American Resort Development Association
  • American Securitization Forum
  • Associated General Contractors of America
  • Building Owners and Managers Association International
  • Certified Commercial Investment Member Institute (CCIM Institute)
  • Commercial Real Estate Finance Council (formerly CMSA)
  • Community Mortgage Banking Project
  • Institute of Real Estate Management
  • International Council of Shopping Centers
  • Loan Syndications and Trading Association
  • Mortgage Bankers Association
  • NAIOP, Commercial Real Estate Development Association
  • National Apartment Association
  • National Association of Real Estate Investment Trusts
  • National Association of Real Estate Investment Managers
  • National Association of Home Builders
  • National Multi Housing Council
  • The Real Estate Roundtable
  • Securities Industry and Financial Markets Association

The challenge is to keep the message, and the Senate’s focus, simple despite the expansive scope and length of the “Restoring American Financial Stability Act of 2010”  – yet financial reform is a topic that invites amendments. (Recall the 473 amendments made on the bill in the Senate Banking Committee.)

The letter [download] addresses the importance of the securitization market as a key source of liquidity for economic recovery. The message is very simple and pointed:

  • credit markets are constrained despite enormous demand for credit and significant loan maturities – all in the face of declining values
  • new accounting changes will limit balance sheet capacity and the overall amount of credit
  •  the bill’s proposed “risk retention” terms will further limit balance sheet capacity and lending capacity

The letter states that “given the totality and far reaching implications of regulatory and accounting changes, there are serious concerns about the future viability of the securitization markets that are critical to borrower access to credit and an overall recovery.”

Perhaps because the letter is from a broad segment of the US economy, it does NOT address several important topics of importance to commercial real estate, such as –

  • Covered bonds: note that on March 18, the House Financial Services Committee – Capital Markets Subcommittee (ranking members are Scott Garrett, R-NJ, Chairman Paul Kanjorski, D-PA, and Spencer Bachus, R-AL) introduced covered bond legislation. I’ll address this important bill in a future blog posting (For background on covered bonds: link)
  • Rating agency reform: clearly this is a topic of key importance for securitizations involving commercial real estate (i.e., CMBS).

Regardless, it is good to see a broad spectrum of key industry groups join together is support of a specific, and focused, aspect of the reform legislation.  The collective strength will be needed.  It will be an up-hill battle.

If you have thoughts or comments, please post them below.