Commercial real estate secured a significant victory in the debate over financial regulatory reform when the House of Representatives exempted commercial mortgage-backed securities (CMBS) for risk-retention language. The House-passed bill (HR 4173, the Wall Street Reform and Consumer Protection Act of 2009) requires companies that sell mortgage-backed securities to retain at least 5 percent of the credit risk. However, it grants regulators the flexibility to allow a third-party investor—or B-piece buyer—to satisfy the requirement.
HR 4173 also would require the Federal Reserve and financial regulators to examine the combined impact of new retention requirements and new accounting standards (FAS 166 and 167) on credit availability, and to report to Congress with specific recommendations prior to any rulemaking on the retention.
The Senate has yet to consider a bill, although Senate Banking Chairman Chris Dodd (D-CT) has released draft legislation (Restoring American Financial Stability Act) that imposes an even higher retention amount of 10 percent.
NAA/NMHC will continue to follow this issue and will advocate against any provisions that would unnecessarily restrict credit to the apartment sector.