Strength in numbers.
The servicing peer groups, supported by MBA staff and resources, provide market data and information, set industry standards, offer training, provide legislative and regulatory advocacy, and undertake projects that could not effectively be undertaken by individual organizations. The servicing industry and entire commercial real estate finance business benefit greatly from these efforts.
The commercial servicers most affected by the current capital markets disruption are those heavily involved in primary or master servicing commercial mortgage-backed security (CMBS) transactions. The CMBS market has virtually shut down, with issuance in the first half of 2008 down by 90 percent from the comparable period in 2007.
The Mortgage Bankers Association CMBS CEO (chief executive officer) Roundtable represents the CMBS servicing market, with participation by senior executives of the individual servicers. MBA also organizes peer groups representing portfolio lenders and their subservicers, and multifamily agency seller/servicers with Fannie Mae, Freddie Mac, Federal Housing Administration (FHA) and Ginnie Mae mortgage portfolios. These servicers face different issues and challenges, but they benefit from their ability to develop and implement solutions that address their common interests.
Standard-setting is another valuable activity that benefits both servicers and the overall commercial real estate finance industry. MBA has supported a number of major standard-setting initiatives, including the development of a collateral property site inspection form. This standard has been adopted by a number of industry participants, including mortgage portfolio investors and multifamily agencies. This has provided consistency among investors, servicers and third-party field services vendors, and has improved the efficiency and quality of property site inspections.
MISMO[R] is an example of a technology standards effort that could not have been undertaken without the sponsorship and resources of a substantial industry trade association such as MBA. The commercial MISMO project is supported by servicing industry participants, technology vendors and consultants. To date, progress has included negotiating an intellectual property rights agreement to facilitate broad industry participation; and developing the overall project data architecture, a data dictionary and reference model.
The group successfully released its first standard for commercial servicing transfers in 2006, with eight additional new standards released or in development, including an extensible markup language--based (XML-based) property inspection form.
The CMBS industry has grown dramatically as a result of standards for reporting, which have created unprecedented transparency for CMBS investors and rating agencies. These standards were developed by CMBS servicers and other market constituents, and are maintained through the Commercial Mortgage Securities Association (CMSA), New York. The CMSA and MBA are jointly working on a project to convert the existing investors Reporting Package to XML, an advanced standard for data transmission using the MISMO protocols. This effort will have major benefits for all industry participants.
Companies that have implemented some of the current MISMO standards have seen major improvements in data quality and reduced cost. As the industry continues to adopt the standards, participants will realize significant improvements in the cost to service, manage and originate loans; improved operating efficiencies for all parties in a transaction; and more data transparency, which should improve investor confidence.
In addition to providing expert staff and resources to support the commercial and multifamily servicing peer groups, as a broad-based, industry trade association, MBA also provides a unique forum to collect and disseminate information. MBA can also collect and aggregate data that would otherwise be considered proprietary and confidential by an individual company.
As a group, the MBA servicing committees can address issues that could, in a different context, raise competitive or antitrust issues. For example, MBA carefully monitors the discussion of issues such as servicing fees or market share, which have antitrust implications.
The MBA research staff conducts an annual survey of the commercial and multifamily servicing industry, and publishes the definitive league tables that detail the company servicing portfolios by type. The MBA research department also sponsors benchmarking studies in which servicers provide specific operational and economic data on a confidential basis, and then the aggregated information and analysis are distributed back to the participants. This provides the information necessary to compare and evaluate an individual company's operations against its peers.
To date, these studies have been related to a specific activity, such as collateral property site inspections or financial statement collection and review; however, the opportunity exists for even broader analysis.
MBA also provides education and training to support the commercial and multifamily servicing industry. Many servicers use MBA's educational resources in conjunction with their internal employee training programs. This includes basic education about the commercial real estate finance industry, in addition to more in-depth training related to specific types of mortgage products and servicing activities.
Servicers benefit from not having to develop their own resources and curriculum, and can use the MBA materials as a core curriculum. By supplementing this core curriculum with additional courses addressing their own unique activities, servicers can efficiently create a customized training program.
MBA also offers education, training and networking through regional servicing forums and its annual Commercial/Multifamily Servicing and Technology Conference. Additionally, MBA offers recognized industry designations and certifications. Many senior servicing executives have earned their Certified Mortgage Banker (CMB) status, and a new program provides for Certified Mortgage Servicer (CMS) accreditation. These programs document the comprehensive training and experience of participants, and provide appropriate recognition for the accomplishment of earning a professional designation.
The servicer peer groups have provided education for borrowers and investors as well as servicing employees to help provide all these players with a better understanding of the servicer's roles and responsibilities, and to improve the efficiency and working relationship between borrowers and servicers. One such initiative was sponsored by MBA and CMSA to educate borrowers and their representatives about the unique servicing and asset-management issues associated with loans in CMBS transactions.
Legislative and regulatory advocacy is one of the most important activities provided by MBA to support the commercial and multifamily mortgage servicing industry. An individual servicing company would typically not have the leverage to effect change with the rating agencies, multifamily agencies or regulatory bodies. However, as a group, common interests can be debated and advanced.
Issues that require legislative solutions, such as the availability and affordability of terrorism insurance after the events of Sept. l1, 2001, have huge implications for commercial servicers and the entire real estate finance industry. MBA and other groups were successful in advancing the Terrorism Risk Insurance Act legislation and its subsequent extensions.
Another major advocacy effort was undertaken with the Securities and Exchange Commission (SEC), related to the Regulation AB requirements for CMBS servicers. Additional current examples of advocacy efforts involve property insurance disclosure issues and CMBS servicing issues being addressed by the Financial Accounting Standards Board (FASB).
MBA has provided resources and support to advance the commercial and multifamily mortgage servicing industry. The servicers have also made significant contributions of time, resources and intellectual property to advance the common interests of the industry. There are numerous future opportunities for cooperative projects, such as developing electronic submission of borrower operating statements, standardizing CMBS pooling and servicing agreements, and servicing operations benchmarking.
Servicers compete aggressively for business, but understand and appreciate the benefits of cooperation where and when appropriate. The benefits of this cooperation have accrued to both the servicing industry and the broader real estate finance markets.
Stacey M. Berger is executive vice president of Overland Park, Kansas--based Midland Loan Services Inc., a provider of loan servicing and technology solutions to the commercial real estate finance industry. He can be reached at firstname.lastname@example.org
NOTE: The views expressed by the author are his own and do not necessarily reflect the views of Midland Loan Services Inc., or it's affiliates with The PNC Financial Services Group Inc.
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|Author:||Berger, Stacey M.|
|Date:||Jul 1, 2008|
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