July 2011

Ah, baby is one. I remember when mine was — complete with an over-the-top celebration for an infant who had no idea what was going on and would remember nothing of it. The food, the drink, the fancy cake, the ridiculous crown… I chalk it up to a rite of passage for a parent to throw at least one of those unnecessary first birthday parties. On this, Dodd-Frank’s first birthday, I’m not so sure those who birthed it are donning hats, eating cake and sipping champagne in celebration.

On July 19, the Government Accountability Office (the “GAO”) published an 83 page report entitled “MORTGAGE REFORM Potential Impacts of Provisions in the Dodd-Frank Act on Homebuyers and the Mortgage Market.” The report addresses the potential impact on the mortgage market of qualified mortgage (“QM”) criteria, the credit risk retention requirement, provisions concerning homeownership counseling and regulation of high-cost loans. By examining mortgage loans made from 2001 through 2010 in CoreLogic, Inc.’s database, the GAO has drawn some practically meaningless conclusions about the mortgage market. For starters, the GAO acknowledges that the data used for its examination was not necessarily a representative sample. Furthermore, on several occasions throughout the report, the GAO hedges its analysis to the point of, well, uselessness.Continue Reading Dodd-Frank is One! And We Still Don’t Know What a Resi Mortgage is Going to Look Like

What the hell is going on here? I’ve got a business to run, and it’s really annoying that I can’t sort out whether we’re in the early stages of recovery or on the cusp of another train wreck. When Dad taught me to drive, he had to keep saying “Don’t look at where you are but where you’re going.” Good advice. Yet only as long as I look at the road right in front of me do I feel OK. If my eyes wander to the horizon, I get really itchy.

This recovery feels very brittle. Oh, sure, transactional activity is way up. If Dechert’s practice is the first derivative of the broader capital markets (and I think it is), then things have been getting progressively more robust for the better part of a year now. We’re growing, we’re hiring, deals are coming in at a goodly pace. Yet, everyone I know with the slightest capacity for reflection is touchy, to say the least.

So let’s do a S.W.O.T. analysis of where we sit.Continue Reading What in the Hell is Going on Here Anyway?: A SWOT Analysis of the Financial Recovery

A new kid showed up on the CMBS block in 2010: the operating trust advisor, sometimes also referred to as, among other things, the senior trust advisor (the “OTA”). During the great recession and credit interregnum, investors dreamt of an independent third party who would represent the interests of investment-grade investors to protect them from the conflicted and potentially nefarious behavior of special servicers who were considered by some to be in bed with the B-piece buyer and to facilitate an improved flow of information on a real-time basis. Someone who would somehow be there for bondholders when pools began to wobble. When the New York Fed was rooting around for a structure for TALF that would not only execute well but would also provide a learning opportunity for the market, they listened to the IG bondholders, and the OTA was born.

For the regulatory community and some elements of the investor community, it was love at first sight. But by late 2010, some thought that the OTA was going the way of the Edsel. A one-hit wonder. Then, in April 2011, the regulators embraced the OTA in their proposed risk retention rules. And now the OTA may be here to stay. Perhaps bowing to the inevitable, most recent 2011 CMBS conduit deals (and some single asset deals) have utilized some form of an OTA. Continue Reading The Operating Trust Advisor: Here Today, Here Tomorrow