News
For Immediate Release
April 27, 1999

ATLANTA, GA — A group of five leading commercial real estate trade associations known as The Capital Consortium today released a streamlined set of documents designed to expand the secondary market for commercial mortgages and encourage the flow of capital to income-producing real estate properties, including multifamily housing.

The Capital Markets Initiatives, as these documents are known, are meant to be used as guidelines to promote greater efficiency, credit availability and cost savings in the capital markets for commercial and multifamily real estate loans. They were first issued in 1996 by The Capital Consortium, a coalition representing all aspects of the commercial real estate industry whose members include the Mortgage Bankers Association of America (MBA), the National Realty Committee (NRC), the National Association of Realtors (NAR), The Bond Market Association (TBMA) and Commercial Mortgage Securities Association (CSSA).

The updates being unveiled here today at a joint commercial real estate conference are the result of feedback from lenders, borrowers, rating agencies, mortgage-backed securities investors and other users of the Initiatives over the past three years. These updates include:

• a revised Capital Markets Mortgage/Security Agreement — a template for commercial mortgages that can be easily and predictably rated to facilitate the pooling of multiple mortgages for securitization and sale into the secondary market. Designed to ease document review and address the lack of document conformity.
• a revised Assignment of Leases and Rents — provides broader lender protection in the event of a borrower bankruptcy filing.
• a revised Promissory Note

The original Capital Markets Initiatives released in 1996 also contained:

• a Due Diligence Checklist — identifies whether specific information is located within a loan document file. Intended to ease review of document loan files and expedite transactions.
• Data Elements Guidelines — acts as a framework for issuers, investment bankers, loan servicers and investors to better manage reporting information for security holders.
• National Policy Initiatives — recommendations for reducing legislative and regulatory barriers to development of an efficient, commercial secondary mortgage market.

"Our release of the Capital Markets Initiatives three years ago represented a significant development in the evolution of the commercial mortgage-backed securities market," said Joseph Philip Forte, chairman of the consortium’s Documents Task Force and a partner in the New York law firm of Thacher Proffitt & Wood. "A number of lenders and investors have used these highly customizable templates to tailor individual transactions and create more efficient processes — whether on the front end for originations or on the back end for securitization. Today, these documents are part of the reason that originating, packaging and securitizing commercial and multifamily loans is easier, faster and more affordable."

Joseph C. Franzetti, executive vice president for the Real Estate and Mortgage Securities Group at Duff & Phelps Credit Rating Co. (DCR) in New York, agrees. "Streamlining the origination and documentation functions goes a long way toward driving efficiency in the ratings process," he said. "It’s also an important step in allowing commercial mortgage-backed securities to enjoy the same benefits of consistency that their residential brethren have had for almost a quarter century," Franzetti added.

"We view these streamlined documents as an important development in the continued maturation of the secondary market," said Tad Philipp, a managing director at Moody’s Investors Service in New York. "We expect this step to help make the CMBS business more efficient and, thus, more competitive with other forms of real estate finance."

"The Capital Consortium’s ratable document will help move the commercial mortgage industry a step closer toward homogeneity, similar to the way ratable documents have revolutionized the residential mortgage industry," added Gale C. Scott, managing director and head of the Real Estate Finance Group at Standard & Poor’s Structured Finance Ratings.

"Fitch IBCA supports The Capital Consortium’s efforts to develop these documents for the secondary market," added Janet G. Price, group managing director at Fitch IBCA. "In our view, they will ease review of origination practices throughout the industry."

The revised Capital Markets Initiatives (Capital Markets Mortgage/Security Agreement, Assignment of Leases and Rents, and Promissory Note) may be downloaded directly from a special section on the MBA’s web site at www.mbaa.org/capitalconsortium. A summary is also posted in several areas on NAR's web site at http://nar.realtor.com, and in CommercialSource at www.realtor.com

The Mortgage Bankers Association of America is a real estate finance trade association representing approximately 3,000 member mortgage companies, life insurance companies, commercial banks, savings banks, savings and loan associations, pension funds and their advisors, consultants and others in the mortgage lending field.

The National Realty Committee, also known as Real Estate’s Roundtable, is America’s leading public policy advocate for the commercial real industry, representing top business leaders from approximately 200 U.S. public and privately owned companies across all aspects of income-producing real estate.

The National Association of Realtors, the "Voice for Real Estate," is the nation’s largest professional association, representing more than 730,000 members involved in all aspects of the real estate industry.

The Bond Market Association represents securities firms and banks that underwrite, trade and sell debt securities, both domestically and internationally. These debt securities include: municipal bonds, U.S. Treasury securities, federal agency securities, mortgage and other asset-backed securities, corporate debt securities, money market instruments and repos.

Commercial Mortgage Securities Association is an umbrella organization of industry participants having a common purpose of fostering the continued growth of an orderly and ethical global secondary market in commercial real estate finance.

For more information contact:

# # #