Last Thursday evening, Dechert partners in our Finance and Real Estate Group and Bankruptcy, Business Restructuring and Reorganization Group hosted a cocktail party for our clients at our New York office. The main item on the agenda for the evening was simply to take the opportunity to learn more about what’s on the minds of our clients and to discuss the outlook for the remainder of 2011. Also on the agenda for the night – wine, sushi, taking in the view of the Empire State Building and catching up on the latest activity in the Major Leagues.
With well over 100 people in attendance, we had the chance to hear from a wide variety of clients in commercial and residential loan origination, mortgage servicing and securitization (CMBS, RMBS, ABS and CLOs). Across the board, I would say the mood was upbeat and optimistic. Lending is ramping up. Term sheets are being drafted. Bankers are talking more about securitization as a viable take out strategy.
I was thinking back to the client event like this that we held in late September of last year in connection with an American Securitization Forum Sunset Seminar. The theme at the time was largely the unintended consequences of the Dodd-Frank Act (which, at the time, we were all still trying to fully digest). We’ve since commented on proposed regulations related to Section 943 (related to disclosure of breaches of securitization representations and warranties) and Section 945 (related to due diligence requirements) and have seen final regulations promulgated by the SEC on those rules. More importantly, we have finally seen the multi-agency collaborative effort on proposed rules related to risk retention. We spent weeks last fall agonizing over what the risk retention proposed rules might look like. We then spent many more weeks early this year waiting for the proposal to finally come out. Better late than never. The proposal is far from perfect but at least it has finally arrived and we can get on with trying to fix it as best we can.
We hope to soon have some certainty on what the ground rules are so we can get the securitization business back in full swing. There will be a lot of long industry-wide conference calls hosted by CREFC, MBS, SIFMA and ASF as we all come up with our wish lists of fixes to risk retention before final comments are due in early June. I’m looking forward to our next client event when we all look back and congratulate ourselves for laying the groundwork for a market recovery.
By Ralph Mazzeo.