CrunchedCredit : Capital Markets Finance and Real Estate Attorneys

The American Securitization Forum (ASF) Conference returned to Las Vegas on Sunday after short stints in DC and Orlando.  As you may recall, the Conference’s last hurrah in Vegas in 2009 was not well received by the Fourth Estate – the juxtaposition of investment bankers meeting in Sin City with the then-recent creation of the $700 billion Troubled Asset Relief Program was low hanging fruit for a media eager to assign blame for the credit crisis.  Three years later, over 4,000 securitization professionals, including investment bankers, originators, servicers, trustees, accountants and of course, lawyers, are back in full force here in Vegas.  The mood here stands in stark contrast to 2009 when we were staring into the abyss.  We have since survived the worst of the credit crisis and have been steadily rebuilding the securitization machine.  The dismay and depression of 2009 have been replaced with the sense that we can, in fact, see the light at the end of the tunnel.  But how close we are to the end of that tunnel differs greatly by asset class.  For example, Monday’s CLO panelists noted that they expected to see continued strong growth in 2012, building on a very successful 2011.  On the other hand, the future of non-agency RMBS is unfortunately not looking as bright in 2012.  Panelists discussing the 2012 Market Outlook again pointed to the regulatory as well as domestic and international fiscal issues that still need to be resolved before we can see a true recovery in securitization.  Looking back at the 2009 ASF Conference Agenda, I found that the program included “substantive panels on critical policy challenges confronting the market, including TARP, TALF, mortgage finance and foreclosure avoidance legislation, loan servicing and loss mitigation initiatives, GSE reform, and what to expect from the new Congress and administration.”  Well, we’ve worked our way through TARP and TALF.  For better or worse (mostly worse) we now have Congress’s answer to the credit crisis – the Dodd-Frank Act.  And of course, GSE Reform is still TBD or possibly RIP.  So the near future will in many ways be similar to the past few years: more proposed rules and more comment letters to the SEC et al. I’ll follow up with more news from ASF which concludes Wednesday and will provide insights from the eight other Dechert attorneys here with me in Las Vegas.

By Ralph Mazzeo

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The image of the cresting wave looming behind the dais in the Loews' Americana Salon during Douglas Holtz-Eakin’s keynote address posed a central, if unintended, question that was addressed by more than one speaker during the three-day conference.  Are we riding a wave to recovery or facing a deluge of maturing debt?  For most of the 1,200 industry participants that occupied Miami’s South Beach for CREFC’s annual January conference last week, there seems to be no certain answer (other than almost unanimous agreement that South Beach is a better Winter destination than our Nation's Capitol).

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Recently, the Wall Street Journal highlighted the arrival of “bad loan securities.” If this is a trend, and I both hope and think it is, we clearly have to get a better deal name for these than “Insert Bank Name”, Bad Loan Securities 2012-1. Securitization of less than ideal conduit product has been with us since the birth of securitization, but reached its apogee in the RTC series, for non-performing loans, in the early to mid 1990s. That transaction architecture is being revived, and it’s about time. Both Fitch and DBRS have published criteria, or at least guidance and the other agencies are beavering away, busy working with bankers to come up with workable ratings technology.

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Over a thousand lenders, borrowers, servicers, lawyers and other service providers have descended on Miami for three days of networking, meeting and doing things you just can't do in DC. After a Sunday spent checking in, catching up and Tebowing, the conference kicked off in earnest this morning. I started my day with a PSA Task Force meeting - an important industry initiative. The committee is working hard to develop a standardized format for the more mechanical aspects of a pooling and servicing agreement, with an eye toward making loans work for borrowers and servicers alike (Rick offered some prescient comments regarding the importance of emphasizing the exercise as something that will, at the end of the day, make the servicing of securitized loans more efficient and user friendly). As I type, I'm listening to the opening general session, an overview of CRE fundamentals and where we are in the cycle (the common themes being the effect of the jobless recovery and the specter of $700 billion or so of debt maturing in the next 24 months). Tonight, Dechert will welcome over two hundred clients and colleagues for dinner at Asia de Cuba - we are looking forward to a great opportunity to talk to our friends. Tomorrow's schedule is similarly packed, highlighted by a keynote address by Douglas Holtz-Eakin. We will continue to blog from the conference.

By Matthew Clark.

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It’s that time of year when we’re forced to think about budgets and business plans. The pointy headed types from the accounting department want to know exactly what we’ll be doing the second week of next May and, as I’m sure every one of you have said (or thought) when confronted with such bureaucratic insanity: If I knew exactly what I’d be doing and what the business environment would look like next year, I would (A) not tell you, and (B) stop doing this. But with that said, and notwithstanding my crystal ball is as opaque as the bottom of a Stygian cave, we need to plan.

So, I’ve been thinking. What the heck are we going to do next year? Is the CMBS market irrevocably broken? Was Credit Suisse trigger happy or prescient, stepping away from the market? Will investors buy bonds? Will European banks sell assets like it is the last hour of a bake sale? How about the US banks? Will banks make loans? Will we pare down the list of eager CMBS lenders to 10? Will the life companies replicate their boisterous 2010-2011? Will we finally see the bubble of refinancing we have been predicting to occur in two years for the past five, actually happen in 2012?    Will investors commit enough money to the high yield sector and will the mezzanine market really be hot? Will we ever do a covered bond? Will we ever do a CRE CDO (like I’ve been prattling along about for quite a while now)?   Live in hope; die in despair, as my daddy-in-law used to say. Will real estate people actually build new stuff and launch new projects? Do you think China would lend us a construction crane or two just for a while? Will risk retention arrive? Reg AB 2.0? What about the Volcker Rule? Will the rating agencies continue to conduct business as usual? What will the elections bring? Will the Greeks sell the Parthenon? Will the Italians sell the Tower of Pisa? Will haughty France play the poodle to Mrs. Merkel? What ultimately about Germany? Will the Europeans continue to support their champion national banks while they compete for a starring role in the next Night of the Living Dead movie? Forever?

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