2011

Last Wednesday, Laura Swihart and I attended CREFC’s after-work seminar on the new model set of representations and warranties, which the group is set to release in coming weeks. The model set is the product of a patchwork committee of 50-odd individuals representing the full gamut of industry types – securitization issuers, bond investors, rating agencies, servicers, wall street banks, life insurance companies, law firms, third-party providers and other interested parties. As a member of the committee, I’ll second CEO John D’Amico’s statement applauding the hard work of the committee. It takes a special group of people to stay energized through 90 minutes of heated discussion on the phrasing of property insurance requirements; the enthusiasm so many of my fellow committee members brought to each meeting and conference call was astounding.

The initiative is, in large part, a response to the SEC’s new Exchange Act Rule 17g-7 (initially proposed last October and final rule released in January), which, among other things, requires that the rating agencies identify, on a deal-by-deal basis, deviations from industry-standard reps and warrants. CREFC hopes that the model set will serve as the basis upon which all deals will be judged. It’s not necessarily clear whether the model reps will be widely utilized by the market, or how the SEC rules will be implemented – deals have obviously been selling for over a year without industry-wide agreement on a form of reps and warrants.Continue Reading TriBeCa 2.0: CREFC Prepares to Release Model Loan Seller Reps and Warrants

2500 of my best friends and I spent three days at the MBA’s annual CREF meeting in San Diego last week. By now, it’s old news, but, indeed, the mood was very upbeat. Just like the days of yore, everyone spent every working moment in lender-mortgage banker meet and greets, exchanging braggadocio over pipelines, products and relationships. People even had the energy to return to old fights and grudges: portfolio lenders vs Wall Street squaring off after sharing a fox hole these past three years. Most heartwarming.Continue Reading Tales From The Conference Circuit: Can I Be Both Giddy and Anxious?

A colleague and good friend of mine is house shopping. She spent last weekend touring a home in Hingham – a popular, picturesque waterfront suburb south of the city where many travel to Boston’s financial district each morning by ferry (the trip across the Harbor shaves 40 minutes off the commute). The listing caught her eye because of the size of the home and the price – a little too big, a little too well-maintained for the asking price. Turns out the home was being offered by a developer that had acquired the property from a foreclosing lender – something commonplace throughout the country as the national housing market desperately seeks to achieve stability. But in post-Ibanez Massachusetts, where home ownership can rest on an (unelected) judge’s determination that mortgage assignment documentation was defective, buying a home that has been subject to foreclosure (at any point) is a risk that perhaps no reasonable purchaser can take.
 Continue Reading The Defeasance of Mr. Bevilacqua: Fallout from Ibanez Decision Continues in Massachusetts

ASF 2011 kicked off yesterday, February 6, at the Orlando World Center Marriott.  Dechert attorneys Malcolm Dorris, Ralph Mazzeo, Patrick Dolan, John Timperio, Cindy Williams, Andrew Pontano, Lorien Golaski and I are hosting a cocktail party for clients and friends here this evening.

Congressman Scott Garrett (R-NJ), Chairman of the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises (GSEs), delivered the featured address this morning, February 7. In his new role as Chairman, Congressman Garrett will be a key player in the debate over the future of the GSEs, the implementation of the Dodd-Frank Act and the continued development of a legislative framework for a covered bonds market in the U.S.Continue Reading ASF 2011 Kicks Off in Orlando, Florida

On January 20th, the SEC finalized its first batch of many rules to come under Dodd-Frank, requiring issuers to perform reviews of the assets underlying their ABS securities and requiring them to disclose fulfilled and unfulfilled repurchase requests for alleged breaches of representations and warranties.  These have effective dates beginning with 2012 issuance so, to a certain extent, we can kick the anxiety can down the road for a while.  Nonetheless, this is a pretty clear window into what may be a bleak regulatory future.  And that’s important now.  More on this later.

Rule 193 (release here (pdf)) requires an issuer to know something about the assets it’s securitizing.  The issuer is supposed to do diligence to understand the assets it securitizes and tell the investor about the nature of its inquiry.  Curiously, and I’m not complaining here, Rule 193 does not purport to define what disclosures need be made, just that there ought to be “robust" and "transparent” diligence behind them. Its inquiry must be “designed and effected to provide reasonable assurances” that the disclosures about the assets are correct.

Hardly shocking.  Call me silly, but that seems to be what we do in structured finance.  I guess more information about exactly what the issuer did to understand the assets it securitizes could be useful, particularly in asset classes in which the asset level data is sketchy and aggregate.  It’s just silly in CMBS when we already deliver vast quantities of granular data in every deal.Continue Reading The FinReg Sheriff Arrives in Town: Do You Feel Safer?

Although there is renewed optimism for a vibrant CRE lending market in 2011 (or at least a significantly better market than the prior 3 years), many lenders and servicers continue to face challenges in dealing with delinquent or defaulted commercial mortgage and mezzanine loans (whether held on balance-sheet or securitized). The volume of these “scratch and dent” assets are expected to increase this year and are responsible for continued misfortune by masking positive returns and causing realized losses. Despite this misfortune and the associated headaches, there is appetite in the industry to acquire or aggregate large portfolios of these loans on the cheap, and make a buck or two in the process of restructuring the loans or exercising remedies.Continue Reading Liquidating Trusts: Let’s Detoxify the System at Last

I’m sitting in the Grand Ballroom at the JW Marriot (filled to capacity) and listening to Tucker Carlson give his thoughts on likely GOP challengers to the President. I’ve seen him before – he did a great bit with Paul Begala a few years ago at the MBA in San Diego; very likable and very, very funny (told a great story about receiving a call from Donald Trump that I don’t think I can reprint here). His early pick for the Republican nominee is New Jersey’s Chris Christie.Continue Reading CREFC Day 2: Tucker Carlson, Chuck Schumer and Dodd-Frank

The industry descended on our Nation’s Capital this morning for the 2011 CREFC conference: "Commercial Lending: The New World Order". It was -2 at Logan when my shuttle took to the air – needless to say I’m more than happy for the opportunity to spend a few days with friends, clients and colleagues in a warmer climate. (Current DC temperature is 24 degrees – not quite Stone Crabs at Joe’s, but I’ll take what I can get.) Continue Reading CREFC Day 1: Penn Avenue Freeze Out

In a widely-covered slip opinion issued late last week, the Supreme Judicial Court of Massachusetts denied two securitization trustees’ requests to quiet title with respect to a pair of foreclosed homes. Press reaction was fast and perhaps a touch too furious – CNN Money hailed the Court giving “banks a ‘beat-down’ over foreclosures”, while Reuters used the word “catastrophe”. The Journal saw the decision as a “setback” – probably the more sober analysis (which isn’t meant to downplay the importance of the Ibanez decision – lots of uneasy servicers will be scrubbing mortgage loan files in the coming months). But the decision itself is not, from a Massachusetts’ lawyer’s perspective, terribly surprising and, in fact, could actually be read to ratify certain practices common in securitized lending.Continue Reading Ibanez Foreclosure Decision a Concern for Massachusetts Lenders

I have a Leapster Explorer™ on order for my son’s 5th birthday that I seriously hope arrives in the next two days, but in addition to that delivery, there’s a lot of securitization-related rulemaking required or permitted to be delivered under the Dodd-Frank Wall Street Reform and Consumer Protection Act that was enacted on July 21, 2010 (“Dodd-Frank”).

Fewer than half of the rulemaking provisions in Dodd-Frank specify when the required or permitted rule should be issued or go into effect. Some of the Dodd-Frank rulemaking provisions require multiple agencies to issue rules jointly, some provisions require multiple agencies to issue rules separately, several provisions require that rules be issued by one agency in consultation with another agency… Some rulemaking deadlines are based on date of enactment of Dodd-Frank (July 21, 2010), others on the effective date (July 22, 2010, except as otherwise specifically provided in Dodd-Frank).

Below is a discussion about where we are in connection with some of the Dodd-Frank provisions that are of particular interest to the securitization industry.
 Continue Reading What Are We Still Waiting For and When Should it Arrive?