October 4, 2011
Ms. Elizabeth M. Murphy
Secretary
Securities and Exchange Commission
100 F Street
NE Washington, DC 20549
Re: Re-proposal of Shelf Eligibility Conditions for Asset-Backed Securities and Other Additional Requests for Comment, Release Nos. 33-9244 34-64968 File No. S7-08-10
Dear Ms. Murphy:
CMBS.com appreciates the opportunity to respond to the Commissions request for comment on the Re-proposed rule changes to Regulation AB (Proposal). Our comments are focused only on disclosure requirements and formats as it relates to Commercial Mortgage Backed Securities (CMBS).
As a matter of background, CMBS.com provides commercial real estate software known as Backshop (learn more at www.backshop.com), which standardizes underwriting for lenders, rating agencies and investors. Since our software provides a common underwriting calculator to analyze the commercial real estate collateral, we are experts at knowing what data is required to perform commercial real estate credit analysis. We are also experts regarding existing CMBS monthly reporting (the CREFCs IRP version 5) because we have CMBS data products which require us to download and import the IRP monthly (learn more at www.cmbs.com). Since we know what is needed for credit analysis through our development of Backshop and know what is currently provided in the IRP through our CMBS data products, we are uniquely qualified to comment on the data requirements needed for transparency in CMBS.
Question 68: Question with respect to the implementation of Section 7(c) by the proposed rules:
Both schedule L and LD are steps in the right direction, especially as they relate to new disclosures needed on the debt, including full amortization terms and debt outside the trust. However, both schedules fall short of requiring the data needed for collateral valuation.
Specifically, the deficiency relates to the disclosure of full rent rolls for the underlying real estate. The current IRP, and the proposed Schedule L and LD, all only require limited information on the top three tenants. The lack of rent roll disclosure for all tenants is the single biggest gap in current CMBS reporting and the most important new data disclosure the SEC should require.
The law per Dodd-Frank says that in order to securitize an asset the issuer must disclose enough information for both the investors and rating agencies to value the underlying collateral. Current CMBS reporting and the Commission's proposed schedule L and LD fall short of providing the data required to comply with this law. If rent rolls were added to both schedule L and LD, the required transparency will be achieved.
Question 69: Question with respect to the proposed required XML format:
We applaud the Proposals requirement that reporting be provided in XML. While we acknowledge that existing CMBS reporting (IRP v. 5) is better than other asset classes, the fact that the monthly reports are in CSV, Excel and even PDF, greatly limits the transparency of CMBS. Furthermore, if rent rolls are to be included in the disclosures, XML is the best format because it supports the many-to-one relationship of tenants-to-properties.
MISMO (Mortgage Industry Standards Maintenance Organization) has developed XML standards for both the commercial and residential real estate markets for the past 10 years. MISMO has rent roll XML standards that were developed in a collaborative, non proprietary structure and they are available free of charge. If rent rolls are added, the addition of the existing MISMO rent roll XML standard would be preferable to a new standard that would need to be developed. MISMO has also worked with the CREFCs IRP committee in converting the existing IRP v 5 to XML and has a logical data dictionary schema capable of handling the IRP, Schedule L and LD, rent rolls, operating statements and other data that may be required. Using existing data standards, especially the IRP and MISMO, will make industry adoption easier.
Conclusion
We applaud the Dodd-Frank Bills requirement for transparency in securitized products and appreciate the SECs role in implementing the appropriate rules to ensure such transparency. We hope our comments regarding the current deficiencies in CMBS reporting are helpful in helping the SEC decide the appropriate data fields required for both Schedule L and LD. We also hope that the SEC will establish rules that are consistent with existing standards where possible to limit disruptions and costs.
If you have any questions or would like to discuss our comments, please contact Jim Flaherty at (415) 576-8008 or at jim@cmbs.com.
Sincerely,
Jim Flaherty
CEO, CMBS.com and
Co Chairman, Commercial Mortgage Industry Standards Maintenance Organization (C-MISMO)