Kroll Bond Rating Agency (KBRA) releases the recap for day three of the CREFC conference. The third and final day of the conference involved a program consisting of three sessions, including an education session called CMBS 201: Servicing Participants and Processes.
The opening session of the day?Commercial Mortgage-Backed (In)Securities: Challenges and Opportunities Facing CMBS?delved into the current state of the CMBS market and started with a discussion of issuance volume. Panelists noted CMBS issuance, particularly in the conduit space, has been adversely impacted by a variety of factors, including government-sponsored enterprise (GSE) originations, a shift in property type allocations, a limited pool of maturing CMBS loans and an increased number of financing sources. Notwithstanding issuance concerns, one panelist noted credit metrics are healthy, credit enhancement levels are stable, and the conduit space is "very investable".
Panelists also advanced numerous ideas on how to improve the CMBS product offering, including: reversing the placement of amortization and interest-only (IO) periods during the loan term (aka, IO on the back end); reducing the multiple levels of review by servicing parties; reallocating certain duties from the master to special servicer and encouraging a stronger relationship between the two parties; and standardizing the definition of common terms in the PSA (including net cash flow and loan triggers). Overall, the panelists identified many challenges and opportunities facing the CMBS market and noted that, since the Great Financial Crisis and in the wake of implementing risk retention, the market has proved to be resilient.
The day's second panel?At the Table or on the Menu?: CRE Government and Regulatory Update?discussed political and regulatory matters influencing the commercial real estate (CRE) capital markets. Key topics included trade wars with China and Mexico tariffs, the upcoming 2020 election, and CRE regulatory policies: HVCRE, Opportunity Zones, GSE reform, CECL, beneficial ownership, CFIUS, and HMDA.
This concludes our coverage of the June 2019 CREFC conference. KBRA was proud to sponsor the event, along with over 30 other firms.
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KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.