The Joint Economic Committee, headed by Congresswoman Carolyn Maloney, held a hearing on commercial real estate challenges called Commercial Real Estate: Do Rising Defaults Pose Systematic Threat?
The Commercial Mortgage Securities Association (CMSA) praised the move in a release. Patrick C. Sargent, president of the association, said he is pleased that the committee is considering issues related to commercial real estate, including the need to restart securitization and to successfully implement the financial stability plan.
CMSA stated that it will soon be releasing white papers on several issues that caution against reforms that may undermine the market’s recovery.
These include retroactive accounting changes, regulatory reforms inconsistent with the structure of CMBS, and REMIC proposals to authorize loan modifications and restructure contracts.
Though Sargent recognized the importance of regulatory reforms, he said CMSA cautions against some reform proposals because they could distract from efforts to get credit flowing, a critical mission of the financial stability plan.
CMSA said it believes that the revival of the CMBS market is essential to stabilizing commercial real estate.
Today’s release said that $3.5 trillion of the $6.7 trillion commercial real estate market is financed through debt, and that several hundred billion of commercial mortgage loans will come due this year.
Sargent said that if the insufficient lending capacity to refinance performing loans continues, the downturn in commercial real estate valuation and losses will increase, leading to further constraint of credit availability.