MISMO, Risk Retention and OBL

Lots going on this week, including a MISMO Data Summit, federal risk retention proposals and the end of Osama Bin Laden.

MISMO Data Summit

Plans are full steam ahead for a C-MISMO data “Summit” May 16 at the MBA Servicing and Technology Conference in Chicago. About 75 individuals from 30 companies got personal invitations.

The Board of Governors and the MBA grouped the companies into six types: issuers, investors, rating agencies, servicers, GSEs and vendors. We split up the lists. My list consists of issuers and investors including Bank of America, Wells Fargo, JPMorgan, CWCapital, PNC, MetLife and New York Life.

The invite’s opening paragraph says:

“For the last several years, participation in, and funding for, Commercial MISMO (C-MISMO) has declined. Yet today our industry finds itself at a point where Commercial MISMO will be most needed, with the development of more standardized reporting systems and detailed regulatory oversight. Decisions need to be made regarding our industry’s belief in and support for C-MISMO. To strategically assess how C-MISMO should move forward, and to determine its direction, the Mortgage Bankers Association and MISMO’s Commercial Governance Committee would like to personally invite you to a MISMO Summit at this year’s Commercial/Multifamily Servicing and Technology Conference in Chicago.”

The Summit will either bring industry agreement on a common data standard with buy-in and commitment from the group, or it will be sparsely attended and/or bog down in debate with no clear agreement. I’ll report back after the conference on attendance and results.

Risk Retention

The federal regulators issued their joint proposals for risk retention a few weeks ago. They took a hard line with CMBS. While the rules do not go into effect until April 2013, and they might change after the comment period, they include three provisions that are unexpected and problematic:

  1. Premium Capture Reserve Account – The regulators introduced the concept that issuers must not monetize and book the profits from a securitization until after all the bonds have been repaid instead of when they are issued upfront. This provision is a big change and a big deal.
  2. Operating Advisor – The third party B Piece buyer will only satisfy the risk retention requirement if there is an “Operating Advisor” overseeing the asset management decisions of the special servicer / B Piece buyer.
  3. Exempt Loan Test Too High – The regulators put such low LTV and high DSCR requirements that very few CMBS loans would qualify as being “exempt” from risk retention.

If the regulators take as hard a line on disclosure as they did on risk retention, adopting XML will be inevitable — after all, that’s what they intended from the beginning.

That being said, I think getting the disclosure requirements right is much more important than the risk retention rules. I would be happy if the regulators gave a bit on retention as long as they get the disclosure right. Hopefully the feds do as good a job on securitization reform as they did on taking out Osama.


I was as happy as anyone that we took out Osama Bin Laden. We were all touched by 9-11, and I chronicled my story in my first blog post.

The Navy Seal raid was amazing, and I am glad justice was delivered on the spot. I was in New York this week and went by ground zero to pay respects and see the progress of the Freedom Tower. Finally, the building is coming out of the ground.

The Freedom Tower!

The Freedom Tower!

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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.



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