A trade group representing commercial real estate interests is reporting that a recent exchange between Sen. Bob Corker (R-Tenn.) and Sheila Bair, chairman of the Federal Deposit Insurance Corporation, is creating confusion in the market over final safe harbor, risk-retention rules for securitizations. John D'Amico, recently named chief executive of the CRE Finance Council, sent a letter to Bair saying implementation of the FDIC's safe harbor rules appears to supplant Dodd-Frank until 2013. Therefore, the structure, timing, and eventual enforcement of safe harbor is leaving uncertainty in a market that is slowly coming back to life. "While it has been correctly asserted that some asset classes, such as residential mortgage-backed securities, remain dormant, we believe it is important to note that the CMBS market is showing signs of revitalized activity, which makes deliberate and coordinated policy and implementation by asset class even more crucial at this critical time," D'Amico said in the letter. This year, there have been seven CMBS deals completed with a total issuance of $4.5 billion through the third quarter, according to the council. CMBS issuance for the fourth quarter will likely range between $4 billion and $8 billion with as much as $35 billion of coming in 2011. But meeting these goals requires regulatory certainty, and the CRE Finance Council is currently working on a 'best practices' set of guidelines for the industry. The FDIC, it appears, is slowing the release of that guidance. The final safe harbor rule was effective Sept. 27. Since then, CMBS market participants actively considering deals and planning related to lending and investment have become confused by the following exchange that occurred at a hearing of the Senate Banking, Housing, and Urban Affairs Committee on Sept. 30:
Sen. Corker: "This whole issue of securitization was one that I think we were all trying to understand how this 5% retention would work. And I do look forward to talking to each of you. This is obviously – especially in the commercial side, I mean there’s just nothing happening right now. And..." Chairman Bair: "We don’t – it doesn’t apply to commercial."
Additionally, D'Amico points to technical abutments between safe harbor and Dodd-Frank "The Dodd-Frank act instructs that the regulations to be promulgated thereunder 'become effective … two years after the date they are published in final form in the Federal Register, for assets other than residential mortgages.' Thus, the implication of the auto-conform provision is that the risk retention rules adopted pursuant to Dodd-Frank will not supplant those in the safe harbor rule until April 2013," according to D'Amico. Jacob Gaffney is the editor of HousingWire. Write him.