MERS takes over management of MISMO from the MBA

Today John Courson of the MBA held a conference call with the residential and commercial leadership of MISMO to let us know that MERS, Mortgage Electronic Registry System, has taken over management of MISMO (See news release below).

MERS was created by the industry (the MBA has an ownership stake in MERS) to facilitate the electronic exchange of mortgage rights in support of securitization. It is a registration system (think universal loan ID) so loan servicers can do their job when it comes to releasing liens or foreclosing on loans that had been securitized. MERS has had great success in the Residential MBS market, and their services seem just as applicable to the commercial side. To be honest, I have heard about them forever but, I am not an expert in loan servicing, so I’m not sure how widely they are used in Commercial (I will find out).

Is this a Big Deal? Could be.

If every CMBS loan had a universal ID, that would be a big deal. The main headache with the existing IRP data is making the relationships between the various reporting files (loan, bond, property). If we standardized the way we relate these things together, that is half the battle. IRP in XML is nice to say, but I know firsthand that the data is not there in the raw form to facilitate it. It can be figured out to be sure: Lots of people are doing it (me, Trepp, Intext), but it is a painful, manual, value-added process. If all loans had a universal numbering system so the basic relationships were electronically available, that would be ideal.

What about deals that have multiple loans and multiple properties?

In MISMO, a commercial deal is defined as having many Loans (first mortgage loan, second mortgage loan, even partnership liens) and many properties. Usually, systems from the residential side are focused on the loan level, not the deal level, so tracking multiple loans — with various liens and many pieces of collateral — within one deal is challenging. If MERS registration solves both the loan and deal relationships, that will be a Really Big Deal.

Even if a MERS registration only solved the relationship between loan and bond and property, it would still be a big deal. The majority of the 850 billion dollars in CMBS are first liens, so knowing my position in the capital stack is less important than if I’m in a lower position. So, even if MERS is only at the note level, and since I am usually in first position, it would still deliver substantial benefits by clarifying the relationship from loan to the property and bond files.

Is this a Big Deal? Could be. …

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News Release

CONTACT: Cheryl Crispen
(202) 557-2726
ccrispen@mortgagebankers.org

WASHINGTON, D.C. (February 4, 2009) The Mortgage Bankers Association (MBA) and MERSCORP® today announced the two organizations have entered into a management agreement under which MERSCORP will be responsible for managing the day to day operations of the Mortgage Industry Standards Maintenance Organization, Inc.® (MISMO). Under the management agreement, MBA retains full control of MISMO and will maintain a permanent seat on the MISMO Board of Directors.

“MBA is pleased to enter into this agreement with MERS signaling the next generation of MISMO,” said John A. Courson, president and CEO of MBA. “It has always been the intent for MBA to develop and nurture MISMO and then align with another entity to conduct day-to-day management of the company in a way that best serves the real estate finance industry. MERS, as an industry utility owned in part by MBA, provides an ideal infrastructure for MISMO and will ensure the user experience of current MISMO participants remains constant at its current high level. We are confident this agreement will result in the continued enhancement of data standards and transparency which are critical to the return of investor confidence and liquidity in our marketplace.”

“As the mortgage industry’s utility, MERS has always been a strong supporter of MISMO in the advancement of industry standards,” said R.K. Arnold, President & CEO of MERS. “We are pleased with the confidence that the MBA has shown in us by entrusting management of MISMO’s day-to-day operations to us on behalf of the real estate finance industry.

The management agreement is effective immediately. MISMO subscribers should contact Dan McLaughlin (danm@mersinc.org <mailto:danm@mersinc.org>) or Gary Vandeventer (garyv@mersinc.org <mailto:garyv@mersinc.org>) at MERS, (800) 646-6377, for assistance with any MISMO matter.</mailto:garyv@mersinc.org></mailto:danm@mersinc.org>

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The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 370,000 people in virtually every community in the country. Headquartered in Washington, D.C., the association works to ensure the continued strength of the nation’s residential and commercial real estate markets; to expand homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety of publications. Its membership of over 2,400 companies includes all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending field. For additional information, visit MBA’s Web site: www.mortgagebankers.org .

MERS is a utility launched by the mortgage banking industry to eliminate paper from the mortgage life cycle. MERS facilitates the electronic exchange of mortgage rights and supports the transition to electronic mortgages. It currently has more than 3,800 members.

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Jim Flaherty is CEO of CMBS.com 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.

www.cmbs.com

www.backshop.com