Industry Leaders Hope to 'Loosen' REMIC Restrictions.(Real Estate Mortgage Investment Conduit)

The Mortgage Bankers Association and the Commercial Mortgage Securities Association are taking advantage of a "window of opportunity" to try to "loosen up some of the restrictions" on the Real Estate Mortgage Investment Conduit structure, Robert Vestewig, chief operating officer, GEMSA Loan Services, told a panel session at the MBA's commercial real estate finance/multifamily lending convention here.

The REMIC structure governs CMBS transactions. "Managing real estate is not a passive task," Mr. Vestewig said, since "markets change and tenants change," but REMIC rules "tend to limit substantial modifications" to CMBS loans.

The MBA is pursuing the changes with a letter to the chairman of the House Banking Committee, while recognizing that this is an election year and that it will be hard to have any "controversial changes" made, Mr. Vestewig said. If the changes are made, securitized commercial mortgage loans will have more flexibility and CMBS will be more competitive with whole loans, according to him.

Responding to a question about how level the field will be if the REMIC rules are altered, Mr. Vestewig noted that in a securitized pool, different levels of approval will still need to be obtained, whereas a portfolio lender can still come up with a solution in one step. He doesn't believe that altering the REMIC rules will lead to a flood of requests for changes.

Jack Cohen, CEO, Cohen Financial, and moderator of the session, noted that the change could impact "those who have been abusing the system by holding loans captive."

If "free market dynamics" come into play, "those who want to give good service will survive and those who don't will go out of business," he believes.

At a related MBA panel session on "myth-busting" that sought to address the issues related to borrowing from a conduit lender, vis-a-vis borrowing from a portfolio lender, Warren Friend, a Morgan Stanley managing director, explained that the REMIC ...