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CEC-X was formed to make good commercial real estate (CRE) loans better.
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CEC-X developed Credit Enhancement Contracts (CECs) as the first Basel III compliant credit protection solution for CRE finance.
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The CEC-X platform enables CRE lenders to utilize CECs to transfer the risk of quality CRE loans to institutional investors that profit from writing Eligible Guarantees in normal markets and workout CRE assets in distressed situations at conservative attachment points, or basis.
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The CEC-X platform acts as a sophisticated, online marketplace engine that sorts, ranks and presents individual CRE loans to targeted CEC Writers, according to proprietary algorithms, screens and profiles.
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CECs employ a similar structure to a European-style put option, but with unique interim default provisions written within a standardized contract.
​
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CECs are well suited for distressed markets, but effective in all market environments.
-
CEC-X was formed to make good commercial real estate (CRE) loans better.
​
-
CEC-X developed Credit Enhancement Contracts (CECs) as the first Basel III compliant credit protection solution for CRE finance.
​
-
The CEC-X platform enables CRE lenders to utilize CECs to transfer the risk of quality CRE loans to institutional investors that profit from writing Eligible Guarantees in normal markets and workout CRE assets in distressed situations at conservative attachment points, or basis.
​
-
The CEC-X platform acts as a sophisticated, online marketplace engine that sorts, ranks and presents individual CRE loans to targeted CEC Writers, according to proprietary algorithms, screens and profiles.
​
-
CECs employ a similar structure to a European-style put option, but with unique interim default provisions written within a standardized contract.
​
-
CECs are well suited for distressed markets, but effective in all market environments.
-
CEC-X was formed to make good commercial real estate (CRE) loans better.
​
-
CEC-X developed Credit Enhancement Contracts (CECs) as the first Basel III compliant credit protection solution for CRE finance.
​
-
The CEC-X platform enables CRE lenders to utilize CECs to transfer the risk of quality CRE loans to institutional investors that profit from writing Eligible Guarantees in normal markets and workout CRE assets in distressed situations at conservative attachment points, or basis.
​
-
The CEC-X platform acts as a sophisticated, online marketplace engine that sorts, ranks and presents individual CRE loans to targeted CEC Writers, according to proprietary algorithms, screens and profiles.
​
-
CECs employ a similar structure to a European-style put option, but with unique interim default provisions written within a standardized contract.
​
-
CECs are well suited for distressed markets, but effective in all market environments.
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Capital Relief = Improved ROE
Why Banks List Loans on CEC-X
We understand that lenders, especially those active in the commercial real estate (CRE) market, face many challenges in the current environment, including high interest rates, rising risk of default, and regulatory pressure to increase capital levels. We are confident that CEC-X is an effective solution for these issues.
CEC-X ENABLES LENDERS TO DO WHAT THEY DO BEST…
Originate, underwrite and service loans and provide profitable ancillary services to their banking customers.
AND GET RID OF THE REST….
Transfer credit risk in an expensive regulatory capital environment to private non-bank investors better suited to holding long term CRE credit exposure.
WHILE SECURING BENEFITS…
Significant reduction of required regulatory capital, retained loan interest and fees, higher ROE, lower concentration ratios, clear distress resolution process and unchanged borrower relationships.
Benefits for Bank CRE Lenders
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Transfer credit risk exposure from CRE loans
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Cost-effective release of expensive regulatory capital
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Reduce CECL accounting charges
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Retain loan on balance sheet and all related borrower-facing servicing roles (borrower relationship unchanged)​
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Manage concentration risk exposure across sectors and important bank customer relationships
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Retain all or a portion of loan related fees:
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All applicable loan fees (e.g., closing costs, exit fees, etc.)
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Loan servicing rights
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A portion of ongoing loan interest rates
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Increase ROE from CRE lending operations
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Develop symbiotic, rather than competitive, relationship with private debt capital market participants
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Free up capital for new loan origination and associated fees
Why Banks Employ CECs
Employing CECs
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Delivers certainty of 100% recovery for bank CRE lenders if a borrower defaults via standardized cash-collateralized Credit Enhancement Contracts that qualify as Basel and OCC “Eligible Guarantees”.
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Means CRE loans are fully secured by investors' cash collateral and lines of credit funded and cleared by CEC Clearing Members (jointly acting as the “Eligible Guarantor”) with no derivative or insurance contract component or exposure.
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Solves the historical illiquidity and associated regulatory challenges for banks carrying CRE loans by adding new, sophisticated participants to the traditional two-party loan transaction.
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Keeps documentation efficient by using a standardized ISDA-like master contract that is specifically tailored as a non-derivative Eligible Guarantee for CRE loans.
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Ensures liquidity for CRE loans, regardless of market conditions, which enables Lenders to refinance and restructure loans or, if necessary, shift credit risk to creditworthy investors capitalized and with expertise to resolve exercised CECs.​
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Provides a new tool for Lenders to offer Borrowers credit resolution when unforeseen circumstances require loan restructuring.
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Improves the process of working out troubled loans by adding guaranteed, unconditional “stand-by capital”.
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Acts as pre-packaged and transparent credit default solutions (“Belt and Suspenders” Protection) for troubled CRE loans.
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Locks-in a recovery floor (at par) for troubled CRE loans with limited exposure to CRE workout and/or loan sale expenses.
CEC-X helps banks and other lending institutions release significant amounts of regulatory capital associated with their books of CRE loans, which they can then use for other purposes, while maintaining vital customer relationships and compliance with applicable regulations.
Essentially, CEC-X matches lenders, which handle loan origination, underwriting and servicing, with investors that are willing to absorb long-term credit risk. We do this through a platform that enables the transfer of credit exposure from bank lenders to institutional investors via standardized proprietary credit enhancement contracts (“CECs”) between the parties.
The CECs are cash collateralized and are “stapled” to each CRE loan to create an individual standardized and pre-approved Basel and OCC-compliant Eligible Guarantee.
That guarantee allows the regulatory capital requirement on a loan to reduce by as much as 90%, especially critical at a time when capital requirements may become more of a burden for certain institutions.
Capital Relief and Liquidity for CRE Loans
When banks transfer CRE loans through CECs, they receive cash collateral and guarantees that 100% offset the credit risk of holding CRE loans on their balance sheet.
With CECs, existing regulatory guidelines for treatment of Basel Qualifying Eligible Guarantees allow banks to release regulatory capital associated with CRE loans, so that banks can make more new loans. At the same time, by adding transparency and efficiency, CEC-X makes obtaining credit protection on quality loans easier to obtain.
Accordingly, CECs and CEC-X enable banks to issue more loans to more borrowers who want to refinance, build, buy, or improve commercial properties.
With additional lending, banks using CECs on CEC-X can generate significant annual fee income from origination, underwriting, and ongoing servicing roles.