The CRE Finance Council filed a comment letter with the Federal Deposit Insurance Corp. (FDIC) responding to the government agency's proposed Safe Harbor rule.
As reported on yesterday by StructuredFinanceNews.com, the American Securitization Forum (ASF) submitted its comments to the FDIC yesterday. Please follow this
FDIC's Safe Harbor rule addresses the treatment of assets during the potential insolvency of an FDIC-backed institution.
The FDIC rule is being worked on because of the new accounting rules FAS 166 and 167. This is to ensure that assets transferred by an insured depository institution into a securitization pool are protected from any of the institution's insolvency proceedings.
In its comment letter, the CRE Finance Council requested the FDIC to carefully consider the negative effect that piecemeal reforms would have on market participants' certainty and confidence, specifically investors. The proposed rule as it currently stands would also hinder a commercial real estate recovery, the CRE said.
"The CRE Finance Council appreciates the opportunity to comment on this important issue, and recognizes that the FDIC's goals and ours are well aligned, with the unifying purpose of ensuring that capital continues to flow into the commercial real estate markets in an efficient and responsible manner," said Lisa Pendergast, president of the CRE Finance Council and managing director of CMBS strategies and risk at Jefferies & Co. "Regulatory reform, as it relates to securitization, must be crafted to support and encourage the recovery of the commercial real estate market and the economy as a whole," Pendergast added. "The FDIC must be mindful to ensure that investors have confidence in the protections afforded by the safe-harbor framework and that the framework reflects congressional intent on securitization reform, particularly as it relates to joint rulemaking."
The Council also urged the FDIC, and financial regulators more broadly, to work within the new and coordinated framework directed by Congress in H.R. 4173 or the Wall Street Reform and Consumer Protection Act, which requires regulators to promulgate joint rules by asset class. This will ensure that securitization reforms are coordinated as well as customized, the Council said.
"Tailoring regulation is especially important in addressing assets such as CMBS, which have innate characteristics that minimize the risky securitization practices that policymakers wish to address, but could suffer detrimental effects to liquidity and credit availability if reform mandates do not take these unique characteristics into account," the Council's letter stated.
The CRE Finance Council's membership believes that the alignment of the interests of lenders, issuers and investors in the securitization process is necessary. The Council has always advocated for enhanced transparency and sound practices within the industry. It will continue to work with market players and policymakers to build on the exisitng disclosure as well as other safeguards in CMBS.
According to the notice of proposed rulemaking, the new FDIC Safe Harbor rules will go into effect on Sept.30 while the comment period for it ended yesterday.
