Why Risk Retention Rules May Give Big Banks the Edge in CMBS

By Allison Bisbey

The first commercial mortgage-backed security to comply with "skin in the game" requirements was extremely well received. Market participants credit the way the large banks sponsoring the deal retained the risk – a strategy unavailable to nonbank lenders.

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Latest News

NorthStar Preps $90M Private Student Loan Securitization

– The collateral is high quality and highly seasoned; however there is a risk that some of the loans to borrowers studying for the bar or in medical residency could be discharged in bankruptcy, according.

New Plan Would Let FHLBs Accept Expanded Collateral

– The Federal Housing Finance Agency is seeking to make it easier for Federal Home Loan Banks to accept certain kinds of collateral, including commercial real estate loans, for advances.

Angel Oaks Funding Costs Fall in 2nd Non-Prime RMBS

– Angel Oak Capital’s second securitization of non-prime residential mortgages brought its funding costs down significantly, helped by the addition of some new investors.

Home Partners Preps $342M of Single Family Rental Bonds

– The deal is backed by a portfolio of 1,410 single-family rentals, 1,343 of which are leased to tenants who have the right to purchase the leased property at a premium during the term of the lease: Moody's sees this as a credit positive.


Featured Articles

Why Subprime Mortgages Lend Themselves to Securitization

– Many lenders are still reluctant to give mortgages to borrowers with less-than-pristine credit, yet there loans are far more likely than prime jumbo loans to be bundled into collateral bonds. Sreeni Prabhu, CEO and CIO of Angel Oak Capital, credits a lack of competition and higher interest rates.

What Mortgage Insurer Merger Means for Lenders

– Arch U.S. MI's acquisition of United Guaranty Corp. will make one of the smallest private mortgage insurers the sector's new market leader. While the move is likely to ease pricing competition among the six remaining players, it's not expected to set off a wave of further consolidation.

"Skin in Game" Rule a Boon for New Breed of CLO Manager

– Rules requiring CLO managers to keep skin in the game of their deals has taken a toll on smaller firms. But the resulting thinning of the ranks has created room for some new players that are better capitalized, including insurance companies.

Banks are Keeping Their Own Skin in This CMBS

– Wells Fargo, Bank of America, and Morgan Stanley could have satisfied regulators by selling the riskiest slice of the commercial mortgage securitization to a designated third party; instead they are collectively holding on to 5% of each tranche of securities issued in the $870.6 million deal.

FHA, Lenders Clash Over Financing Greener Homes

– The Federal Housing Administration is promoting a particular kind of financing for residential energy retrofits that another regulator staunchly opposes. Mortgage lenders and investors have qualms, too, about the impact on their standing in collateral claims.

Why Credit Card Losses Are Poised to Rise

– The unusually strong loan performance in the credit card business lasted longer than many observers expected. But today the industry's prolonged post-crisis era finally appears to be over.

Strategy to Woo New CLO Investors Starts to Pay Off

– Since 2013, CLO Managers have been issuing notes with rates that are initially low, but step up after 18 to 24 months, betting that they can refinance them more cheaply; so far their success has been mixed.

Private Student Loans Get an A for Credit, C for Growth

– Banks that stuck with student lending after the financial crisis are finding the business far less risky than it used to be.


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Firm: NewStar Financial

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States Joining Ranks of Student Loan Cherry Pickers

State student loan authorities sense a business opportunity helping graduates who are gainfully employed lower their payments. Their low-cost funding could put them in competition with banks and marketplace lenders.

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