Potential Relief for CMBS Risk Retention Sent to the U.S. House of Representatives

March 04, 2016

The “Preserving Access to CRE Capital Act of 2016” (the “Act”), sponsored by Representative French Hill (R-AR), was reported favorably to the U.S. House of Representatives on March 2, 2016 by the House Committee on Financial Services by a bi-partisan vote of 39-18. The Act would modify certain aspects of Section 15G of the Securities Exchange Act of 1934 (“Section 15G”) as it relates to commercial mortgage-backed securities (“CMBS”) transactions.

Specifically, if passed into law, the Act would modify the credit risk retention rules applicable to CMBS transactions in three important ways:

  • exempting single asset/single borrower securitization transactions from the requirements of the credit risk retention rules;
  • allowing up to two third-party purchasers of an eligible horizontal residual interest to hold such interests in a senior/subordinate structure; and
  • modifying the criteria for the qualifying commercial real estate loan exemption to allow more commercial real estate loans to qualify under such exemption.

If passed into law, the Act would require the Agencies to promulgate new risk retention regulations implementing such changes.

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