The Conference of State Bank Supervisors is endorsing legislation that could help restart the securitization market for small commercial mortgages held by community banks.
State regulators are "beginning to see some signs of stability in loan performance and collateral values," Iowa banking superintendent Thomas Gronstal told the House Financial Services Committee.
"Given where we are in the current economic cycle, we believe Congress can play an important role in the CRE market by providing a federal guarantee for prudentially underwritten loans," he testified.
Speaking on behalf of CSBS, Gronstal endorsed the Commercial Real Estate Stabilization Act sponsored by Rep. Walt Minnick, D-Ida.
The Minnick bill would authorize the Treasury Department to guarantee up to $25 billion of commercial mortgage-backed securities. The underlying loans would be small commercial mortgages originated by small and mid-size banks.
"This will allow our smaller community banks to clear their portfolios of illiquid but performing CRE loans," Rep Minnick said at Thursday's hearing.