On October 21, six federal agencies concluded a two-year rule writing process for risk retention guidelines required by the Dodd-Frank Act. While much of the proposal concerns the single-family sector, it also includes provisions that affect the commercial mortgage-backed securities (CMBS) market.
Specifically, B-piece buyers who purchase the most subordinate CMBS bond classes, including those secured by multifamily assets, will be required to retain five percent of the risk for at least five years under the final rule. The risk can be shared with up to one other B-piece buyer, including the issuer, and can only be sold to another accredited B-piece buyer after five years. Commercial real estate industry participants anticipate the new requirements will result in a 25 to 50 basis point interest rate increase for borrowers using CMBS as a financing source.
NMHC/NAA worked with regulators to make changes to the more burdensome risk retention requirements originally proposed by regulators in 2011. We also continue to actively work with regulators to monitor the impact of this rule on access to credit for multifamily borrowers since CMBS is an important and growing source of credit for the multifamily industry.
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