Big Easy showed early seeds of transparency
The MBA Commercial/Multifamily Servicing and Technology Conference I just attended was much more about business issues that servicers face (covenant violations, defaults, foreclosures and a general lack of liquidity) than how technology can help solve those issues. While words like transparency and efficiency were sometimes used, the belief that technology is need to achieve these goals seemed lacking.
That being said, there were several positive signs that standards might be achievable:
- There was limited but strong support for C-MISMO standalone rent roll and operating statement standards.
- I heard a great definition of transparency: “Timely access to data to enable accurate decision making.”
- I (and a few other vocal supporters) supported the need for XML in order to achieve transparency on three different panels and in numerous cocktail conversations.
Institutional Data Arrogance alive and well
As much as I liked the definition of transparency I heard, another phrase caught my ear when we were discussing why the CRE industry has had such a hard time adopting standards. The person stated most firms in CRE suffer from “Institutional Data Arrogance” and have no desire to openly share data, evidenced by:
- XML and MISMO were not discussed during most sessions. When questions were raised by the audience, the panel members usually dismissed technology and MISMO.
- The majority of the panels had to do with business issues, not technical solutions.
- People who have been working on standards for a while have reached the point where they suggested the only way the industry will implement standards is if standards are forced on us by the government. Yikes.
Marketing XML and MISMO
Due to the general lack of interest in XML, we spent a lot of time discussing how we could do a better job of marketing the benefits of XML and MISMO standards. We came up with:
- Reminding folks that Transparency is equal to XML, XML is equal to MISMO, and MISMO is equal to IRP 6. They are all the same thing, so if they use the word Transparency, they can substitute the words XML or MISMO.
- Expanding the concept of MISMO as being more than just a CMBS solution but rather a commercial real estate standard that is relevant to all capital sources (portfolio, syndication, agency and CMBS).
- Creating and implementing our own standards is a much better road than waiting for the government to dictate standards to us.
- We cited a couple examples of companies using the MISMO standard to save money: 1) Bank of America boarding 500 loans in three days by using the MISMO loan servicing transfer standard. 2) Genworth uploading 3,000 operating statements and rent rolls by converting the data from Excel to MISMO XML and then inserting the XML into its database.
- We achieved a commitment by the CMSA to have an open dialogue about adopting and implementing IRP 6 at the June conference.
- A healthy debate/discussion on my last panel, “The Future of Reporting.” A senior group of folks representing the major master servicers debated the cost and timing of implementing a real estate reporting standard that actually gives the recipient enough information to value the loan. I would not say I convinced any of them to make XML investments, but at least I got them discussing it.
While I came out of the conference with plenty of examples of progress, I was reminded that standards adoption in CRE is a tough project. Discussion points included: real-life business issues surrounding managing defaulted loans, potential REMIC accounting changes, no investor confidence, no rating agency trust, head fakes from Washington on TALF/TARP, too much work and not enough resources. Technology in general and XML and MISMO in particular were not universally sold as answers to any of these issues.
Is this resistance due to our inability to “sell” XML/MISMO? Is it the lack of strong leadership from the MBA/CMSA on the XML point? Or, are we confronting the stubborn and sticky fact of “Institutional Data Arrogance;” is there no desire — and, in fact, strong resistance — to making the data open and transparent? Time will tell.
Big Easy update
This was my first trip to New Orleans since Katrina. You couldn’t see the physical damage on the road from the airport to the French Quarter, but you could tell the city was still hurting. The airport was basically empty. The flights and the hotels were cheap. The drinks and the strip joints on Bourbon Street were all “on sale.” Most telling of all was talking with cab drivers. They always seem to have a pulse on a city (or at least have strong opinions) and there was no shortage of negative New Orleans opinions shared with me.
That being said, the restaurants were relatively full, and the food was fantastic. There was lots of live music and really friendly people. I had a bunch of fun: Cheap hotels, drinks and dances are never a bad thing!
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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.