I wrote about the disconnect between our CRE CLO technology and the task at hand (finding acceptable lever in an expanding leverage desert) in my last commentary.  While the CRE CLO remains the best form of match-term, non-marked-to-market finance for portfolio lenders and represents the best alignment of interests between sponsor and investor across the

There’s a lot of reasons to structure a large loan destined for securitization as a mortgage in part and a mezzanine loan in part.  Sometimes it’s simply that the borrower is needy while the capital markets are charry.  In that case, the lender whacks up the credit into a mortgage loan for SASB execution and assumes (hopes) there’s someone out there with sufficient acumen, optimism or naivete to buy the mezzanine loan.  But sometimes, there are other reasons to divide a loan into a mortgage and mezz.
Continue Reading SASB: The (Shotgun?) Marriage of Mortgage and Mezz

Last week, the U.S. Department of the Treasury released proposed rules providing tax guidance around various LIBOR replacement issues.  Long anticipated.  The defenestration of LIBOR will leave considerable broken glass in its wake.  Perhaps just so the tax professionals wouldn’t feel left out, the end of LIBOR will create a series of tax problems.  Very briefly, changing the price index of a loan, and certainly a mortgage loan, might be a significant modification under the so-called 1001 Rules.  The result of that?  Without a fix from our friends at the IRS, that change may be deemed an exchange of an old financial asset for a new one, creating potential gain or loss, violating the REMIC requirement that pools be static and violating the provisions of the REMIC rules.  Obviously, those adverse consequences under the tax code were not intended by anyone and it would seem that we ought to get a simple fix.  Changing the index is not a significant modification and therefore none of the other follow-on bad things happen.  The end.

While, as we’re sure everyone knows, it’s not that simple and the IRS, instead of saying, “you got it fellas, we’re good,” has given us 50 pages of new regulatory code speak. We suggest that you read our OnPoint and we certainly invite you to read the release, which is subject now to public comment, because it is critically important that we get this right.  Here’s a spoiler alert, while the proposed rules basically work, they do create problems and issues which we urge the industry to address to see if we can get this right before the proposed rules go into effect.Continue Reading Proposed Tax Rules on LIBOR Replacements Answer Some (But Not All) Questions