Not much glamour around CMBS.com the last few weeks. We’ve been working hard “clearing” deals to add to our CMBS library. To clear a deal, we must tie out the loans from the setup file with the loans being reported on the Trustee IRPs. This is a slow, labor-intensive process.
Once we tie these loans out, we can successfully “roll” the loans from our source information (the setup files in the Conquest database we acquired from S&P) to the current balances.
We have now cleared about 400 securitizations — including all of 2008 and 2007 and most of 2006 and 2005. We are clearing close to 20 a day, so we should be finished up with all 600 in the next several weeks. We are updating the CMBS.com Free Securitization Search with the 400 this weekend, so enjoy the new goods.
Cover of U2’s “No Line on The Horizon,” to be released March 3.
No Line on the Horizon is the name of the new U2 Album. I am lucky enough to have an advance copy, and we’ve been listening to it as we’ve been grinding through the data. Tracks 3, 4 and 5 (Moment of Surrender, Unknown Caller, I’ll Go Crazy If I don’t Go Crazy Tonight) are as good as any three U2 songs. Can’t wait for that tour –– I have an in there, so we should be front row again — Rock!
Why don’t deals tie easily? For a whole host of reasons, including:
1) The loan was split between securitizations, so there is more than one “servicer loan number” for a single loan in the setup file.
2) The loan paid off. In the older files, these simply were dropped from the list. Now, they are supposed to be reported as “paid off.”
3) The loan defaulted and has been foreclosed on.
4) The numbering systems are off between the setup file, which used Prospectus ID, and the Loan Periodic (the update file), which uses Servicer Loan Number.
So, populating our CMBS library is a manual process where each and every deal has to be touched and “cleared.” But we are figuring out the issues and getting the deals loaded correctly.
At 20 a day, there is a Line on The Horizon — and it is getting closer. …
— — —
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.
https://www.cmbs.com/wp-content/uploads/2019/03/cmbslogo030619.png00jimflahertyhttps://www.cmbs.com/wp-content/uploads/2019/03/cmbslogo030619.pngjimflaherty2009-02-28 21:46:022020-09-16 21:48:46No Line on the Horizon
I just returned from the MBA’s annual Commercial Real Estate Finance (CREF) conference in San Diego. While we were there, the government announced $100 billion from the new bailout plan would be used to provide leverage to investors in AAA CMBS. Most people at the conference were excited. Personally, while I welcome government leadership on a host of issues, I disagree with this strategy.
Do we need to use taxpayer money to provide debt to boost the bond yield for investors in AAA CMBS? The bonds are already trading at 15% pay rates — how much more juice do these guys need!?!
A better idea
So, we came up with a better idea: Let’s take $20 million instead of $100 billion.
In San Diego we talked about the real issues, and the solutions required to fix them. I believe, along with others, investors would come back to CMBS and spreads would tighten if the investors had the information and tools to model the underlying real estate risk.
For sure, no one knows what lease rates and cap rates to use in this economy. But, if IRP 6 went live and full operating statements and rent rolls were included in the XML file, the data would be available to run a bottoms-up underwriting, and the debate could move to lease and cap rates instead of the black hole we have now. That would eventually bring in spreads and spur new lending because the risks would be understood.
Debating the merits of, and even complying with, IRP 6 was a main topic at the conference — particularly among the master servicers. Their official position seemed to be that they would comment on IRP 6, but they wanted infinite time to comply with the XML schema and new content.
They argued the asset class is dead and budgets are tight, so there isn’t enough money to make the changes required to comply with IRP 6. When pressed to quantify the expense of compliance, they gave estimates from $0 to $2 million per servicer. When asked if they would implement IRP 6 without delay if they were paid for it, most said that would make a difference.
Some simple math:
1. 10 master servicers x $2 million each = $20 million
2. For that, we get transparency into an asset class worth almost $1 trillion.
3. We arm investors with the data and tools to do the math and figure out the investments.
4. Bonds start trading, and the log jam is broken.
Think of it as an infrastructure project instead of money to boost an already generous yield. Oh, and by the way, since we would be investing in building a “pipeline” into the data, we will leave behind true reform and the transparency that will surely be the foundation of CMBS 2.0.
Don’t bring a knife to a gun fight
The XML transition has real costs, and the servicers will bear most of them. Some will say we don’t need the $20 million either because the way the PSAs read, if the IRP changes, the masters can be forced to comply.
But, if the government really wants to help the CMBS industry, and they are committed to write a check anyway, I suggest a $20 million investment in infrastructure to speed up transparency would yield far better and faster results than their current plan.
Trying to manipulate a several trillion market with $100 billion is like bringing a knife to a gun fight. Let the government provide the leadership and capital needed to disclose and reform CMBS data, but leave the economics of the bet squarely in the private sector.
Other Observations from MBA’s CREF Conference
Happy Hour at the CMBS.com booth.
MISMO and MERS – I spent several hours with the MISMO governance and the representative from MERS. There was clearly a frustration level with MISMO volunteers with how the transfer to MERS was conducted. But, it was driven by budgets and it was done with, so most of the time was focused on what next.
Most people agreed that origination standards would not be critical in 2009 because there would be so little origination. Rather, to get a “win” and gain credibility for MISMO, pushing for the adoption of IRP 6 (which is based on MISMO XML schema) was deemed a priority. As for MERS, they seem like nice people, and I think they could prove to be effective agents for progress. They definitely have a presence in commercial and could provide the numbering system for a “Universal Prospectus ID.”
What’s the true impact of MERS? It’s too early to tell.
People – While attendance was down, lots of key people attended the conference. The panels were timely and attracted the true leaders from the institutions they represented. I learned a bunch and had good and lively debate on several occasions.
Booth Duty – This is one of two conferences a year we actually put up a booth in an exhibit hall (the CMSA’s June New York conference is the other). Attendance was down about 50% from last year with significantly fewer exhibitors also. But, at times the floor was jamming and our new investor product was being well received. Booth duty is not glamorous, but it is fun to throw yourself and your product out there and do some old-fashioned selling. I enjoy it when you get a good crowd interested — and especially if you make a sale.
Weather – It sucked (although we need the rain so bad in California it was actually great weather).
Parties – Not great (no Eagles, Grateful Dead, or Steve Miller this year) but not bad at all, surprisingly enough. We found multiple parties around town that offered plenty of free drinks and food. Hey, what good is CMBS reform if you’re hungry and thirsty?!?
— — —
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.
https://www.cmbs.com/wp-content/uploads/2019/03/cmbslogo030619.png00jimflahertyhttps://www.cmbs.com/wp-content/uploads/2019/03/cmbslogo030619.pngjimflaherty2009-02-12 21:49:132020-09-16 21:50:12Keep the $100 Billion. I think $20 million will do the trick
I became such a Metallica groupie last week that my friends are calling me Penny Lane, the “Band Aid” groupie character played by Kate Hudson in the movie Almost Famous. They accuse me of having a “man” crush on Lars — Ahh, jealousy does not wear well on them.
Where to find the best shows
After seeing several shows in all sorts of venues, I can say Metallica is consistent — they alway deliver a rockin’ set. It’s the crowd and the venues that really set the energy level.
The Oakland show was the most intense I saw, followed closely by the Nassau Coliseum show in Long Island. What makes one Metallica show more intense than the other? The size of the mosh pits and slam dancing groups. Try to see a show where there will be an aggressive, active crowd. The great shows with super high energy can happen anywhere (and always in Europe), but I found the older venues in the U.S. tend to promote more energy than the newer venues. But, all that is just on the margins — all the shows had tons of energy.
Check out the Nassau mosh pit love these two shirtless skinheads are showing — they are about to hug it out after slamming the crap out of each other.
Check out the New York Times Review of the Naussau show.
A tight band rockin’ in New Jersey.
After party
After the Saturday night Newark show, the band hosted an after party at Craftsteak at 10th Ave. and West 15th St. The band was all there: Lars, Kirk, Robert and even James who usually passes on the late night scene.
Spoke with Kirk Hammett’s security guard/assistant. We were reliving a story about a plane trip from Belgium to London last summer. The band was playing at a music festival in Belgium, and Lars let me tag along with him.
Metallica had two planes working that trip because James and Lars were in London and Kirk and Robert were in Paris. They all met in Belgium and, after the show, one plane took James and Robert to Greece (for their next gig three days later) and one plane went back to London and Paris because Lars and Kirk were going to go down to Greece the day of the show.
Kirk got on our plane, and when we landed in London, Kirk realized he had forgotten his passport. Not wanting to mess with the paper work, he hid in the toilet and was completely freaked out trying to avoid detection by the custom agents. He ended up getting away with it — amazing enough — but it was fun to relive that story.
Lars, on top of the world. His night is just beginning.
Had a good talk with the bass player, Robert Trujillo, and his wife. They went out on my boat with their baby a few months back, so we were reliving that and talking about the Bay area.
Hung with Lars until the end. From a peak of maybe 100 people at 2 a.m., there were about 15 die-hards left around 4 a.m. when the bar officially closed. The rest of the band had left but Lars was not quite done yet — he has a bit of a reputation as a night owl — so they agreed to let us stay. It was me, Lars, Steve, the guys from the warm up band, the Sword, and about 5 other random folks. We sat around a table drinking wine and shooting the shit until we finally stumbled out around 5:30 a.m.
Next day
I went back to the Hotel Gansevoort, packed, got 45 minutes of sleep from 6 to 6:45, got in a car for JFK at 7, and caught the 9 o’clock American Flight back to San Francisco.
Thank God I got a business class upgrade ’cause I slept from wheels up to wheels down. I got home in time to join my family at a Super Bowl party that was being thrown by, of all people, Skylar Ulrich — Lars’ ex wife and mother of two of his kids. They threw a great party with about 10 couples and lots of kids. After an awesome game, I finally got to sleep. Exhausted.
So, maybe I do have a slight man crush. Better get back to work this week or people will start talking. I will check in next week from the MBA CREF Conference in San Diego.
I shot this Master of Puppets video. Rock!
— — —
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.
https://www.cmbs.com/wp-content/uploads/2019/03/cmbslogo030619.png00jimflahertyhttps://www.cmbs.com/wp-content/uploads/2019/03/cmbslogo030619.pngjimflaherty2009-02-04 21:52:042020-09-16 21:54:01Rocking with Metallica part 2: That is Mr. Penny Lane to you sir
No Line on the Horizon
/0 Comments/in What's going on /by jimflahertyNot much glamour around CMBS.com the last few weeks. We’ve been working hard “clearing” deals to add to our CMBS library. To clear a deal, we must tie out the loans from the setup file with the loans being reported on the Trustee IRPs. This is a slow, labor-intensive process.
Once we tie these loans out, we can successfully “roll” the loans from our source information (the setup files in the Conquest database we acquired from S&P) to the current balances.
We have now cleared about 400 securitizations — including all of 2008 and 2007 and most of 2006 and 2005. We are clearing close to 20 a day, so we should be finished up with all 600 in the next several weeks. We are updating the CMBS.com Free Securitization Search with the 400 this weekend, so enjoy the new goods.
Cover of U2’s “No Line on The Horizon,” to be released March 3.
No Line on the Horizon is the name of the new U2 Album. I am lucky enough to have an advance copy, and we’ve been listening to it as we’ve been grinding through the data. Tracks 3, 4 and 5 (Moment of Surrender, Unknown Caller, I’ll Go Crazy If I don’t Go Crazy Tonight) are as good as any three U2 songs. Can’t wait for that tour –– I have an in there, so we should be front row again — Rock!
Why don’t deals tie easily? For a whole host of reasons, including:
1) The loan was split between securitizations, so there is more than one “servicer loan number” for a single loan in the setup file.
2) The loan paid off. In the older files, these simply were dropped from the list. Now, they are supposed to be reported as “paid off.”
3) The loan defaulted and has been foreclosed on.
4) The numbering systems are off between the setup file, which used Prospectus ID, and the Loan Periodic (the update file), which uses Servicer Loan Number.
So, populating our CMBS library is a manual process where each and every deal has to be touched and “cleared.” But we are figuring out the issues and getting the deals loaded correctly.
At 20 a day, there is a Line on The Horizon — and it is getting closer. …
— — —
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
Keep the $100 Billion. I think $20 million will do the trick
/0 Comments/in Industry news, Industry standards /by jimflahertyI just returned from the MBA’s annual Commercial Real Estate Finance (CREF) conference in San Diego. While we were there, the government announced $100 billion from the new bailout plan would be used to provide leverage to investors in AAA CMBS. Most people at the conference were excited. Personally, while I welcome government leadership on a host of issues, I disagree with this strategy.
Do we need to use taxpayer money to provide debt to boost the bond yield for investors in AAA CMBS? The bonds are already trading at 15% pay rates — how much more juice do these guys need!?!
A better idea
So, we came up with a better idea: Let’s take $20 million instead of $100 billion.
In San Diego we talked about the real issues, and the solutions required to fix them. I believe, along with others, investors would come back to CMBS and spreads would tighten if the investors had the information and tools to model the underlying real estate risk.
For sure, no one knows what lease rates and cap rates to use in this economy. But, if IRP 6 went live and full operating statements and rent rolls were included in the XML file, the data would be available to run a bottoms-up underwriting, and the debate could move to lease and cap rates instead of the black hole we have now. That would eventually bring in spreads and spur new lending because the risks would be understood.
Debating the merits of, and even complying with, IRP 6 was a main topic at the conference — particularly among the master servicers. Their official position seemed to be that they would comment on IRP 6, but they wanted infinite time to comply with the XML schema and new content.
They argued the asset class is dead and budgets are tight, so there isn’t enough money to make the changes required to comply with IRP 6. When pressed to quantify the expense of compliance, they gave estimates from $0 to $2 million per servicer. When asked if they would implement IRP 6 without delay if they were paid for it, most said that would make a difference.
Some simple math:
1. 10 master servicers x $2 million each = $20 million
2. For that, we get transparency into an asset class worth almost $1 trillion.
3. We arm investors with the data and tools to do the math and figure out the investments.
4. Bonds start trading, and the log jam is broken.
Think of it as an infrastructure project instead of money to boost an already generous yield. Oh, and by the way, since we would be investing in building a “pipeline” into the data, we will leave behind true reform and the transparency that will surely be the foundation of CMBS 2.0.
Don’t bring a knife to a gun fight
The XML transition has real costs, and the servicers will bear most of them. Some will say we don’t need the $20 million either because the way the PSAs read, if the IRP changes, the masters can be forced to comply.
But, if the government really wants to help the CMBS industry, and they are committed to write a check anyway, I suggest a $20 million investment in infrastructure to speed up transparency would yield far better and faster results than their current plan.
Trying to manipulate a several trillion market with $100 billion is like bringing a knife to a gun fight. Let the government provide the leadership and capital needed to disclose and reform CMBS data, but leave the economics of the bet squarely in the private sector.
Other Observations from MBA’s CREF Conference
Happy Hour at the CMBS.com booth.
MISMO and MERS – I spent several hours with the MISMO governance and the representative from MERS. There was clearly a frustration level with MISMO volunteers with how the transfer to MERS was conducted. But, it was driven by budgets and it was done with, so most of the time was focused on what next.
Most people agreed that origination standards would not be critical in 2009 because there would be so little origination. Rather, to get a “win” and gain credibility for MISMO, pushing for the adoption of IRP 6 (which is based on MISMO XML schema) was deemed a priority. As for MERS, they seem like nice people, and I think they could prove to be effective agents for progress. They definitely have a presence in commercial and could provide the numbering system for a “Universal Prospectus ID.”
What’s the true impact of MERS? It’s too early to tell.
People – While attendance was down, lots of key people attended the conference. The panels were timely and attracted the true leaders from the institutions they represented. I learned a bunch and had good and lively debate on several occasions.
Booth Duty – This is one of two conferences a year we actually put up a booth in an exhibit hall (the CMSA’s June New York conference is the other). Attendance was down about 50% from last year with significantly fewer exhibitors also. But, at times the floor was jamming and our new investor product was being well received. Booth duty is not glamorous, but it is fun to throw yourself and your product out there and do some old-fashioned selling. I enjoy it when you get a good crowd interested — and especially if you make a sale.
Weather – It sucked (although we need the rain so bad in California it was actually great weather).
Parties – Not great (no Eagles, Grateful Dead, or Steve Miller this year) but not bad at all, surprisingly enough. We found multiple parties around town that offered plenty of free drinks and food. Hey, what good is CMBS reform if you’re hungry and thirsty?!?
— — —
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
Rocking with Metallica part 2: That is Mr. Penny Lane to you sir
/0 Comments/in What's going on /by jimflahertyI became such a Metallica groupie last week that my friends are calling me Penny Lane, the “Band Aid” groupie character played by Kate Hudson in the movie Almost Famous. They accuse me of having a “man” crush on Lars — Ahh, jealousy does not wear well on them.
Where to find the best shows
After seeing several shows in all sorts of venues, I can say Metallica is consistent — they alway deliver a rockin’ set. It’s the crowd and the venues that really set the energy level.
The Oakland show was the most intense I saw, followed closely by the Nassau Coliseum show in Long Island. What makes one Metallica show more intense than the other? The size of the mosh pits and slam dancing groups. Try to see a show where there will be an aggressive, active crowd. The great shows with super high energy can happen anywhere (and always in Europe), but I found the older venues in the U.S. tend to promote more energy than the newer venues. But, all that is just on the margins — all the shows had tons of energy.
Check out the Nassau mosh pit love these two shirtless skinheads are showing — they are about to hug it out after slamming the crap out of each other.
Check out the New York Times Review of the Naussau show.
A tight band rockin’ in New Jersey.
After party
After the Saturday night Newark show, the band hosted an after party at Craftsteak at 10th Ave. and West 15th St. The band was all there: Lars, Kirk, Robert and even James who usually passes on the late night scene.
Spoke with Kirk Hammett’s security guard/assistant. We were reliving a story about a plane trip from Belgium to London last summer. The band was playing at a music festival in Belgium, and Lars let me tag along with him.
Metallica had two planes working that trip because James and Lars were in London and Kirk and Robert were in Paris. They all met in Belgium and, after the show, one plane took James and Robert to Greece (for their next gig three days later) and one plane went back to London and Paris because Lars and Kirk were going to go down to Greece the day of the show.
Kirk got on our plane, and when we landed in London, Kirk realized he had forgotten his passport. Not wanting to mess with the paper work, he hid in the toilet and was completely freaked out trying to avoid detection by the custom agents. He ended up getting away with it — amazing enough — but it was fun to relive that story.
Lars, on top of the world. His night is just beginning.
Had a good talk with the bass player, Robert Trujillo, and his wife. They went out on my boat with their baby a few months back, so we were reliving that and talking about the Bay area.
Hung with Lars until the end. From a peak of maybe 100 people at 2 a.m., there were about 15 die-hards left around 4 a.m. when the bar officially closed. The rest of the band had left but Lars was not quite done yet — he has a bit of a reputation as a night owl — so they agreed to let us stay. It was me, Lars, Steve, the guys from the warm up band, the Sword, and about 5 other random folks. We sat around a table drinking wine and shooting the shit until we finally stumbled out around 5:30 a.m.
Next day
I went back to the Hotel Gansevoort, packed, got 45 minutes of sleep from 6 to 6:45, got in a car for JFK at 7, and caught the 9 o’clock American Flight back to San Francisco.
Thank God I got a business class upgrade ’cause I slept from wheels up to wheels down. I got home in time to join my family at a Super Bowl party that was being thrown by, of all people, Skylar Ulrich — Lars’ ex wife and mother of two of his kids. They threw a great party with about 10 couples and lots of kids. After an awesome game, I finally got to sleep. Exhausted.
So, maybe I do have a slight man crush. Better get back to work this week or people will start talking. I will check in next week from the MBA CREF Conference in San Diego.
I shot this Master of Puppets video. Rock!
— — —
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