MBANow: CREF Corner Office Conversation with DBRS’s Erin Stafford

The Mortgage Bankers Association released a new interview with DBRS Managing Director Erin Stafford, who discussed commercial mortgage-backed securities, the role of rating agencies and the credit outlook for commercial real estate.

StaffordStafford serves on MBA’s Commercial/Multifamily Board of Governors.

“CMBS volume is pretty much on target to hit last year’s level of roughly $85 billion, but the composition is changing,” Stafford said. She noted single-asset single-borrower transactions have grown more than 20 percent in dollar volume this year while conduit transactions have seen a reduction of about 30 percent.

Stafford cited competition from community banks and insurance company lenders as driving the decrease in conduit lending volume in addition to a stigma associated with conduit lending’s real estate mortgage investment conduit structure, which limits a borrower’s flexibility to take certain actions during the life of a loan.

Stafford also addressed the role of rating agencies. “As a rating agency, our role is to assess the risk of a debt instrument,” she said. “What we do is look at the credit of a transaction and ultimately assess the risk of getting repaid.”

Stafford said retail is on everyone’s mind due to Sears’ recent bankruptcy filing. “In general though, fundamentals are still pretty strong,” she said, noting loan-to-value ratios on CMBS product have generally remained in the 60-65 percent range and debt yields are generally reasonable. “Even though you have cap rates at all-time lows, you definitely have the lending in check,” she said.

Stafford also discussed the value of MBA involvement. She said the association serves all capital sources in its efforts to connect mortgage bankers to all these capital sources. “If you look at CMBS for instance, it’s probably about 15 percent of the industry in total today, but the MBA is focused on making sure that CMBS remains a viable source of capital for the long haul. Additionally, the involvement that MBA has with connecting people and lobbying for any new regulation coming forward has been really strong.”

In CREF Corner Office Conversations, MBA Associate Vice President Rob Van Raaphorst talks one-on-one with commercial real estate finance leaders about their business and engagement with the industry. Other videos in the series can be viewed at the MBANow website.