The Commercial Mortgage Securities Association (CMSA) said today that it strongly supports efforts to strengthen the credit ratings system but it opposes reforms – such as differentiation – that lack substance and undermine commercial real estate capital market recovery. 

The House Financial Services Subcommittee on capital markets is holding a hearing today where it will discuss its recently released discussion draft titled The Enhanced Accountability and Transparency in Credit Rating Agencies Act, which, among other items, includes draft language on differentiation of ratings for structured finance products.

The CMSA said that “differentiation” (or the use of “symbology,” such as “AAA.SF”) as an overly simplistic and broad proposal that provides little value or information about credit ratings.

Differentiation, the association said, will only serve to increase confusion and implementation costs, while decreasing confidence and certainty regarding ratings.

Such effects would, in turn, create market volatility and undermine investor confidence and liquidity, which could exacerbate the current constraints on borrowers’ access to capital.

“Most concerning, these superfluous changes have been re-proposed at a time when policymakers are employing every reasonable means to get credit flowing again and the economy is struggling to regain equilibrium,” the CMSA said.

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