Our Mission

Our mission is grand, but it’s simple: To help elevate the entire CMBS market to a more efficient, more credible surveillance standard. The clear benefits include:

• Faster, easier and more cost effective access to loan data.
• Easier, more accurate and more detailed data communication and transfers among all parties. Up and down and across the process with an emphasis on data sharing and common underwriting methodologies.
• Higher investor confidence in CMBS as an asset class. With underwriting tied out to the rent rolls, a transparent standard will help investors make informed decisions — decisions that bring more stable capital back into the CMBS market.

State of the CMBS market

In a word: Transitioning.

In two words: Black Box.

Nobody knows what the market will do next, but we do know the industry needs standards and transparency — now more than ever. Investors and rating agencies do not have sufficient access to surveillance information to accurately assess risk. The CMSA / MISMO XML IRP and data standards are a step in the right direction, and they are making inroads among servicers and investors. We support and are participating in these efforts.

We believe the industry needs a holistic solution: one that encompasses the entire surveillance process from borrower to primary servicer to master servicer to trustee, rating agency and, finally, to the investor. 

In the current CMBS model, origination data comes in a wide range of formats and levels of completeness to the lenders. This data must be packaged and passed to rating agencies and B-piece buyers who get full (if not clumsy) access to all available data. When the securitization closes, lenders pass limited data to master servicers, and critical issuer underwriting models are lost. XML is sometimes used, but not completely and not consistently as Excel still rules the day. Data transfer from the master servicer to the investor via the trustees is relatively standardized and clean (IRP version 5), but the data being reported is missing critical data (specifically the rent rolls). While all master servicers collect rent rolls from borrowers, only some are able and willing to report the data in useable formats. The rating agencies and the investors are handicapped in their activities because of incomplete data reporting and insufficient access to Web based tools to interpret the data.

It’s time to create a common, transparent CMBS platform, with standards and data shared among all parties.

Backshop’s role

Over the past eight years, Backshop loan origination software has improved productivity and transparency among major commercial real estate lenders. More CMBS lenders use Backshop than any other software (visit www.backshop.com to learn more). Backshop has also been adopted by major rating agencies. Used by 50% of the lenders serving the CMBS market.

• Used by the rating agencies.
• Powerful credit risk tools at loan and securitization level.
• Total underwriting transparency to the rent roll level by Backshop’s lease-by-lease underwriting models.
• Web interface. Backshop is the market’s only Web-based lease-by-lease underwriting tool.
• Proven — We have been in business since 2000, and issuers routinely report 100 percent efficiency gains after adoption of Backshop.

While Backshop has helped lenders increase profits, it has also empowered the transfer of data from from lenders to rating agencies, master servicers and B-piece buyers. What Backshop has done for these entities, it can help do for the entire CMBS market.

Surveilling the CMBS universe

Historically, surveillance data has been accessible only through expensive CMBS data service providers. In 2005, CMBS.com acquired one of these service providers, Conquest, and obtained a complete database of all CMBS transactions dating back to 1992. Today, CMBS.com owns and maintains one of only four known complete versions of the entire CMBS universe. 
The CMBS database was ported into the Backshop analytical engine. Using models and monthly trustee data, all loan information is kept current — from the bond level to the loan and property files.
The Backshop analytical engine, coupled with the most complete and current CMBS data available, is the foundation that will allow transparency and improve investor confidence at every level of the market.

Enter the CMBX

The CMBS market entered a new era when, on March 7, 2006, trading started on the CMBX. This synthetic index consists of 25 deals, each sorted by rating class. To make sure the CMBX reflects the current market, a new series rolls about every six months. As of now, five CMBX series have been issued, representing about 125 different deals.
The CMBX enables market participants to engage in credit default swaps (the ability to go long or short on commercial mortgages), while the underlying universe of loans is supposed to provide a statistically significant view of the current health of the commercial mortgage market.
The introduction of the derivatives market is a sure sign that the CMBS asset class is maturing. However, by enabling short selling, the index has made the asset class much more susceptible to market events as evidenced by the vast swings that have occurred over the past several months. The one way to limit this volatility and differentiate CMBS from other asset classes is to improve transparency.

What next?

With the CMBS market in a state of uncertain transition, there has never been a better time to adopt a more transparent, more credible standard.
CMBS.com’s President and CEO Jim Flaherty has long supported the CMSA and has recently joined MISMO to help create and implement shared analytical tools and a shared data platform. As a major (but initial) step toward openness, Flaherty is using this site, CMBS.com, to provide open access to CMBX IRP data.
In the near future, we will be launching a value added product in partnership with the rating agencies that provides expert commentary on the collateral and bond performance of assets included in the CMBX universe.
Ultimately, we envision an open site that serves as the universal analytical and data platform where all members of the CMBS community can find value.

Transparent CMBS standards now!