Risk Retention
Risk retention refers to regulatory requirements that securitizers retain a portion of credit risk associated with asset-backed securitizations, including CMBS. CMBS market glossaries describe the post-Dodd-Frank framework as requiring retention of at least 5% of credit risk, with recognized structures such as vertical, horizontal, and hybrid forms.
- Where it applies
- Federal
- When it comes up
- Securitization structuring and execution
- Property types
- CMBS and other ABS issuance
In practice
Risk retention is a structural driver: it changes who holds first-loss exposure and can influence underwriting discipline and pricing. Risk retention mechanics shape the economics and governance of subordinate risk and frequently influence investor demand and execution pricing.
Related terms
B-piece (concept)credit enhancementcredit riskhorizontal interestsponsorvertical interestvertical/horizontal risk
Underwriting and Risk Modeling
General information, not legal, tax or financial advice.