Tyler R. Morgan


The next crisis in the U.S. economy may be a refinancing crisis in the commercial real estate market. Securitization in the CMBS market has been an increasingly significant source of commercial real estate financing, and revived CMBS lending would mitigate the shortfall in available credit in the coming years. Unfortunately, the risk retention and enhanced disclosure requirements under Dodd-Frank would hinder recovery in the CMBS market without meaningfully improving investor protections. Moreover, these regulations are unnecessary because the greater CMBS market has not experienced the failures that occurred in other markets, and the product structure of CMBS currently provides sufficient investor protections. In conclusion, to avoid the unintended, negative consequences of Dodd-Frank, which would further curtail already scarcely available credit, the first loss position should remain with the B-piece investors in CMBS who are far better suited than issuers to evaluate investment quality and risk of CMBS.