Press coverage of MISMO rent roll and operating statements standards

The commercial real estate news service CRE News picked up the MISMO press release and wrote an article about the new rent roll and operating statement standard.

Hopefully, this will help broaden the debate and discussion about this issue at the CMSA conference in Washington DC next week.

Here is the article:

Mortgage Tech Group Adopts Standard Requiring Full Rent Rolls for CMBS Loans

Wednesday, 13 January 2010
Commercial Real Estate Direct Staff Report

The group that sets technology standards for the mortgage industry has released a new standard, that if adopted by the CMBS industry, would increase the amount of property-level information available to all bond investors.

The standard, developed by the Mortgage Industry Standards and Maintenance Organization, or Mismo, would require that mortgage servicers include information on every lease in every property securing a CMBS transaction and would standardize the way property operating statement information is provided.

The standard, Rent Roll and Operating Statement v. 2.0.1, would need to be approved by the Commercial Mortgage Securities Association before it gets adopted widely in the CMBS market.

The CMSA long ago adopted a uniform investor reporting package, or IRP, that lays out what mortgage-level information must be made available to CMBS investors. The information package was instrumental in the growth of the CMBS market by mandating that certain key information elements about collateral loans and their underlying properties be made available for every deal. The IRP, in essence, is the source for all collateral information available in the CMBS market.

But the IRP only requires that rent information be made available for the three largest tenants of any given property that backs a securitized mortgage. The mandated information includes tenant name, amount of space leased and lease expiration.

That was sufficient for most investors when property values were skyrocketing and investors were evidently not particular about the bonds they bought.

But when the market started crashing three years ago, investors began clamoring for details about every lease in every property in CMBS deals. They argued that to properly value a property or loan, they needed data, such as rents and maturities for every lease, not just the three largest.

That information has long been available to B-piece investors, but investors in more senior tranches only had access to what was mandated by the IRP.

The proposed standard would mandate that entire rent rolls be made available for every property backing a securitized mortgage. That information would include the identity of every tenant, the rent each pays, the maturity of each lease and the amount of available space in the property.

Servicers and property owners, understandably, have long opposed such a mandate. Servicers, because of the costs involved in implementing the standard, and property owners fear that the information could jeopardize their properties. After all, if a property owner knows the expiration date and rents of every lease in a neighboring property, he can siphon off tenants.

But proponents of greater transparency argue that the information is already available through third-party data providers, such as Costar.

As the IRP is currently structured, information is disseminated either in simple database or spreadsheet format, both of which have limitations. Mismo has been trying to move the IRP to the more flexible XML format which, because it’s a system of tagging data, would effectively allow for an unlimited amount of information to be provided on nearly all aspects of a property.

But it hopes the industry adopts the rent-roll standard even if it doesn’t shift to XML reporting anytime soon.

At the same time, Mismo would like portfolio lenders and the housing-finance agencies to adopt the rent-roll standard. But the key is for the CMBS industry to adopt it.

Comments? E-mail Orest Mandzy or call him at (215) 504-2860, Ext. 211.

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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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