Dodd-Frank reforms requiring Wall Street firms to invest in their own CMBS packages will go into effect in December, leaving the biggest CMBS players with some big choices to make.
CMBS giants like Wells Fargo, Deutsche and JP Morgan could do the investing themselves or have third-party "B-piece" buyers do it for them—but those buyers would be locked in to five-year commitments, Bloomberg reports.
The rules could also make lenders pickier about the loans they issue, making it harder for property owners to refinance during the coming CMBS "maturity wall." The rule is designed so CMBS originators have a stake in their own securities, which were ground zero for the financial crisis.
“Originators know their product better than anyone," says Lea Overby, a debt analyst at Nomura Holdings, "and they are less likely to underwrite really bad stuff if they have to hold it.” [Bloomberg]
