Posted on Monday, October 18, 2010
Securitization (of residential mortgages) and proposed reforms of government-sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac were also discussed at ULI this week by Federal Deposit Insurance Corporation (FDIC) Chairman Sheila Bair, who said the end goal of all the confusion and upheaval in the market is to bring securitization back to life in a sustainable manner (www.GlobeSt.com, Oct. 14).
Federal Deposit Insurance Corporation (FDIC) Chairman Sheila Bair
Bair said her agency’s recent “safe harbor” rule eliminates some of the incentives that have motivated servicers to move forward with foreclosure even when borrowers are trying to work out a loan modification. The rule, one of one of many required to implement the Dodd-Frank law, requires FDIC-insured institutions to retain 5% of the credit risk on securitizations completed after Dec. 31 of this year — in order to retain “safe harbor” protection from new accounting rules governing failed-bank assets (Roundtable Weekly, Oct. 1).
Unfortunately, the FDIC’s new rule omits language from the Dodd-Frank Act allowing “B-piece” CMBS buyers to satisfy new risk retention/ “skin-in-the-game” requirements. The Real Estate Roundtable and other real estate organizations are concerned that this could hurt efforts to restart the still-dysfunctional securitization markets, where new issuance plummeted from $230 billion in 2007 to $1.36 billion in 2009, and only recently began to show signs of life again.
Real estate roundtable