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Earlier this month I was a panelist at the HOPE NOW REO Symposium in DC. The Symposium brought together residential mortgage loan servicers, community non-profits, private equity investors, government agencies and lenders to discuss the growing number of REO on the balance sheets of Fannie, Freddie and private mortgage lenders. I participated in a panel that focused on how private investors in REO might finance their investment in a pool of REO. One key financing option for investors will be the securitization of the rental income from the REO. Of course, in order to move this forward, we will need rating agency criteria.Continue Reading REO to Rental: Treating the Symptoms and Not the Disease

With little good news on the horizon for the U.S. residential housing market, public and private programs offering the sale of bulk residential REO is, in many circles, the topic for real estate investment.  The REO-to-Rental play is not without its risks – questions about the availability of financing and the viability of a structured exit remain as key questions.  Still, the strategy may present a favorable opportunity for banks and investors alike.Continue Reading Own-to-Rent: New Approach to Overflow REO Gaining Attention

Seven of our colleagues in Dechert’s active CLO group represented the firm at the first annual IMN CLO and Leveraged Loan Conference in New York a few weeks ago. Strong interest in the collateralized loan obligation technology meant a capacity crowd of more than 750 managers, arrangers and investors, often leaving panel discussions with standing room only.

As participants reviewed CLO performance over the past five years, the theme emerged that CLOs weathered the crisis well compared to other structured finance vehicles. The CLO technology performed as advertised: protecting senior investors and amortizing senior notes during periods when coverage tests triggered.Continue Reading First Annual IMN CLO and Leveraged Loan Conference Update

Last month three of our colleagues attended the Distressed Debt Conference sponsored by CREFC at the New York Athletic Club. Since the topics of distressed debt and loan sales are frequently covered by CrunchedCredit, we thought an update on this conference was worth providing. For those of us not in the New York office, travelling to NYC is always an excellent opportunity to catch up with clients and colleagues. Given that we were talking about distressed debt and there is a lot more of it than there used to be, it was a welcomed change to see that the mood of the conference was very upbeat, and that there was general enthusiasm about the numerous opportunities available in the distressed debt market. Continue Reading CREFC Distressed Debt Conference Update

Well, that didn’t take long . . . Flashback to last month, when we highlighted two eye-opening judicial decisions from Michigan that could potentially have a dramatic and costly impact for recourse guarantors of many CMBS loans.  The Cherryland and Chesterfield cases provoked widespread feelings of uncertainty and unease, as well as the belief that the courts had sacrificed the parties’ (and perhaps the entire industry’s) intent in exchange for a strict reading of the loan documents.  Despite the supposedly nonrecourse nature of the loans at issue, guarantors were faced with the possibility that they could be stuck with a whole lot of personal liability, simply because of a borrower’s inability to pay back its loan when due.  If upheld and looked to as persuasive authority in other jurisdictions, some believed the Michigan cases could run a wrecking ball through the foundation of American real estate finance.Continue Reading Michigan Legislature Proposes Bill in Response to Recourse Cases

Recently, several courts have published decisions interpreting the rights granted to mezzanine lenders under intercreditor agreements – I’ve recently co-authored this Dechert OnPoint detailing the cases. These decisions, in large part, follow the holding of the Stuytown decision (not great news for many subordinate lenders). Also, a recent decision from the United States Bankruptcy Court…

That great whooshing sound you heard a few weeks back may have been the air being sucked out of the room for thousands of warm bodies that penned recourse guaranties on (now) underwater loans during the market’s run-up. The cause: two recent cases coming out of Michigan (Wells Fargo Bank, NA v. Cherryland Mall and  51382 Gratiot Avenue Holdings v. Chesterfield Dev. Co.) sticking recourse guarantors with deficiency judgments on heretofore non-recourse loans based on the interplay of two fundamental tenets of CMBS lending – “bad boy” carve-outs and single purpose entity covenants.

Non-recourse lending is a lynchpin of American real estate finance. The lender is limited in the exercise of its remedies upon default to the collateral – for all intents and purposes, the Borrower gets a check at origination and a put at maturity should things go south. But there are limits – carve outs for fraud, selling the property, stealing rents, filing bankruptcy and other naughtiness will give the lender the right to look to the guarantor to make good on the loan.
 Continue Reading Pay Me My Money Down: Recourse Guarantors Pick Up the Tab in Michigan

The ASF 2012 Conference held last month in Las Vegas was a success by any measure and attracted an impressive number of attendees (4,500).  Attendees were happy to escape New York and other chilly locales and attend some great panel discussions on securitization, regulatory developments and mortgage servicing (or, for some, at least read about those panels the next morning on their iPhones while waiting to tee off).  The owners of the Aria will definitely be able to make their mortgage payment this month with all of the money left behind by ASF attendees. 

My Dechert colleagues and I who attended the Conference cover almost all of the securitized asset classes.  As I described in my blog from the Conference, your particular view of the Conference depends largely on what asset class you focus on in your practice – autos and CLOs, for example, look very strong.  As someone who spent unimaginable amounts of hours of my pre-credit crisis life drafting RMBS deal documents, I yearn for the return of the public RMBS deals  – and not just because I miss spending my days (and most nights) trying to describe in “Plain English” the waterfall on a multi-group negative amortization deal.  I truly believe that we can’t have a meaningful recovery in the housing market without the return of private-label RMBS.  But regardless of what particular asset type you follow, there was undeniably a lot of buzz surrounding a couple of topics. Continue Reading Leaving Las Vegas: Further Thoughts on the ASF 2012 Conference