On Wednesday, March 3, the House Financial Services Committee held a markup of several bills, including H.R. 4620, the Preserving Access to CRE Capital Act, sponsored by Rep. French Hill (R-AR). This bill makes modest changes to the commercial risk retention rules created by the Dodd-Frank Act, which are scheduled to go into effect on December 24, 2016. As written, these rules are overly-broad. They require that sponsors of asset-backed securities retain at least 5% of the credit risk relating to the assets that underlie them. Single asset/single borrower (SASB) commercial mortgage backed securities (CMBS) are not exempt, despite being low-risk, and not the type of transaction Dodd-Frank was intended to regulate. H.R. 4620 would fix this oversight by widening the “Qualified Commercial Real Estate” (QCRE) exemption to include SASB and interest-only loans. Without this fix, liquidity rates will be impaired and borrowing costs will rise.
NAR sent a letter of support for the bill to the Committee, and joined an industry coalition letter as well. The Financial Services Committee approved the bill by a vote of 39-18. NAR will continue to monitor this important legislation, and advocate for its passage as it moves through Congress.