The 2017 MBA will be ground zero for opinions and information on important issues that the CMBS industry is currently working through. At the forefront is structuring CMBS deals for the required 5% risk retention as there is still no consensus on the best execution – the vertical strip, horizontal strip or L-shaped structure that combines the vertical and horizontal structure. On Tuesday, a panel will debate this during a session called “CMBS: The New Normal.”
Implementation of the Dodd-Frank risk-retention rules in late 2016 will allow CMBS players to enter 2017 with a better understanding of the impact of these rules on pricing, loan origination and execution. Panelists will provide some straight talk on CMBS, including the expected impact of these regulations and current industry thinking about the market and loan demand.
In addition, quite a bit of discussion is expected on how smaller CMBS loan contributors will participate under these risk-retention rules as many do not have the capacity or interest in retaining the risk-retention piece of their CMBS deals. At the same time, the larger, well-capitalized banks are finding their deals well received in the market because they are retaining the risk. This is resulting in a competitive disadvantage for the smaller players in the marketplace.
Then there is the wall of 2007 CMBS conduit loan maturities that was to provide robust originations for 2017, particularly during the first half of 2017. But the originations have not shown up!! This topic will be hotly debated as we discover what is happening to these maturing loans (see our 2.8.17 article).