KBRA Releases Research – CRE Securitization: LIBOR to SOFR Path Paved but Curves Lie Ahead

Kroll Bond Rating Agency (KBRA) releases research on the commercial real estate (CRE) securitization industry ahead of the switchover to the Secured Overnight Finance Rate (SOFR) benchmark from LIBOR.

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Business Wire, Inc.Business Wire, Inc.
Retrieved on: 
Thursday, January 21, 2021
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Finance, Banking, Professional services, Commercial Building & Real Estate, Construction & Property, Money, Finance, Interest rates, Economy, United States housing bubble, Swaps, Banking, SOFR, Libor, Securitization
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United States, NEW YORK
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KBRA AND KBRA EUROPE
Summary
Key Points: 
  • Kroll Bond Rating Agency (KBRA) releases research on the commercial real estate (CRE) securitization industry ahead of the switchover to the Secured Overnight Finance Rate (SOFR) benchmark from LIBOR.
  • In 2020, while the COVID-19 pandemic dominated the headlines and captured the attention of the financial markets, the cessation of the London Interbank Offered Rate (LIBOR) loomed closer for the CRE securitization industry.
  • Against this backdrop, KBRA provides an update to its CRE Securitization: Transitioning Away From LIBOR report published in January 2020.
  • In this publication, we will cover what has transpired with LIBOR since last year provide an assessment on the state of CRE securitization market and recap the risks and exposures across the different CRE securitizations segments.


Kroll Bond Rating Agency (KBRA) releases research on the commercial real estate (CRE) securitization industry ahead of the switchover to the Secured Overnight Finance Rate (SOFR) benchmark from LIBOR.

In 2020, while the COVID-19 pandemic dominated the headlines and captured the attention of the financial markets, the cessation of the London Interbank Offered Rate (LIBOR) loomed closer for the CRE securitization industry. As the industry moves forward with the framework and infrastructure to be ready for the switch to SOFR, private label securitization continued to rely on LIBOR, with no issuance coming to market using the alternative rate. However, the need to stop originating LIBOR loans will likely be upon the industry by the end of 2021, despite the recent announcement that LIBOR may continue to be available until June 2023 in order to accommodate, generally, the transition of legacy contracts. On a positive note, the industry is generally adopting the recommended alternative rate fallback language in new floating rate securitizations and the Agencies (Freddie Mac and Fannie Mae) now only purchase floating rate multifamily loans that are indexed to SOFR.

Against this backdrop, KBRA provides an update to its CRE Securitization: Transitioning Away From LIBOR report published in January 2020. In this publication, we will cover what has transpired with LIBOR since last year provide an assessment on the state of CRE securitization market and recap the risks and exposures across the different CRE securitizations segments.

Click here to view the report.

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About KBRA and KBRA Europe

KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe is registered with ESMA as a CRA. Kroll Bond Rating Agency Europe is located at 6-8 College Green, Dublin 2, Ireland.

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