Improved structures, disclosure and clarity are the focus of new proposals to overhaul the European commercial mortgage backed securities market.
An industry working group has proposed changes in four key areas: information for investors; structural features; excess interest paid to arranging banks; and the role of servicers.
The new principles, known informally as CMBS 2.0, are intended to help address legacy issues and draw on lessons from previous CMBS transactions.
These include addressing the system where banks get paid the excess interest from CMBS loans – which exceeds the interest on CMBS notes – by owning what are known as class X notes. Controversy has arisen because banks continue to be paid even when the underlying loan goes into default and investors stop receiving interest payments.
The consultation period is open until 18 September.
bridget.o’connell@estatesgazette.com
