CMSA Investor Conference: Parting thoughts

This year’s CMSA conference was a lot less depressing than I expected. Not because there’s any sense that the market is going to recover in 2009 — everyone is predicting next to zero lending — but because of these three facts:

1) The people who still attend these conferences are survivors at firms that are committed to the space, and few of them think 2009 could be any worse than 2008.

2) Several potential new investors attended. They were “kicking the tires” to find value in the bonds.

3) The parties — at venues like the Shore Club and the Delano — were surprisingly nice.

Not to say it was a big party. Two reminders of the carnage: the attendance numbers were way off, and people were walking around looking for work.

The List

1. Simpler capital structures.
2. Eliminate the concept of restricted data.
3. Clean the form and quality of the data.
4. PSA improvements must be retroactive.
5. Master Servicers are not paid enough.
6. Special Servicers have a huge conflict of interest.
7. Rating Agencies should move away from the Black Box.
8. Structures work better if everyone has skin in the game.
9. Investors are willing to pay for improved data.

A real sense of urgency
The hot topic of conversation was the investor forum, which turned out to be a long scolding about the problems the industry has with getting data through the system. The leadership looked at the “the list” and contemplated a formal response. Conversations were started with the servicers, and I heard several creative ideas that could provide solutions for the investors.

But I also had more than one conversation with experienced and smart people who think “it (real reform) is never going to happen.” Maybe they are too jaded from trying for so many years with very little success. Or maybe they are right.

The Year of Change
While change is hard, and there’s no guarantee of success, I am optimistic. The challenges are not insurmountable and, for the first time, probably ever, there is a real impetus to make improvements.

After all, this is the Year of Change. Yes we can!

My wife and I are headed to Washington next week for the inauguration — to witness history and get inspired for the year ahead. I was invited by the MBA, so I hope to get good access. I will post updates from history next week.

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Jim Flaherty is CEO of and the creator of the Backshop loan origination system. He is a trained credit professional with experience installing enterprise underwriting systems for commercial real estate lenders, rating agencies and investors.

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