Servicers Forum Update A publication of Winter issue 2015 sponsored by CRE Finance World Winter 2015 43 he Servicers Forum is not only the largest of CREFC’s Forums, but also is one of the most actively engaged with numerous initiatives underway. Members include Master Servicers, Special Servicers, Rating Agencies, Trustees, Certificate Administrators, Operating Advisors, Data Providers, and counsel, among others. With over 700 individual members, the Servicers Forum, together with the IRP Committee, plays an integral role in setting industry standards and best practices for the CMBS market. In addition to these important industry initiatives, the Servicers Forum also hosts educational programming. The Forum held four After-Work Seminars this past year in San Francisco, Miami, Dallas, and Charlotte on current issues facing the market and other hot topics. The industry is currently facing several regulations impacting the CMBS market, including Regulation AB II and Risk Retention, which have a direct impact on the servicing sector. CREFC is addressing implementation issues resulting from these comprehensive rules through various working groups. However, the Servicers Forum and IRP Committee not only address regulatory issues, but also current market business challenges and trends. There are currently nine active working groups, many of which have released final best practice drafts and recommendations. The Servicers Forum’s continued objective is the efficiency and effectiveness of the execution of CMBS servicer related responsibilities, especially with regard to communication and timing, and the promotion of market transparency for all parties, including investors. Here are the highlights of these various initiatives, including why they are important to the market and when they go into effect. Reg AB II Schedule AL Working Group In order to ensure a standardized industry approach to implementation of the new asset-level disclosure and reporting requirements in Reg AB II, which was finalized August 27, 2014, CREFC has created a Schedule AL Working Group. Schedule AL will be used for both the offering disclosure as well as ongoing disclosures. While many of CREFC’s recommendations regarding asset-level data points were adopted, the new Schedule AL does not map exactly to the CREFC IRP or Annex A. This working group is comprised of master and special servicers and other market participants, and will conduct a line by line comparison of the SEC’s required asset-level data points to the CREFC IRP and Annex A to determine which fields are new or similar, and how to report such information going forward in the most efficient and useful manner. The subject reports must be finalized and fully functional by October 28, 2016. Operating Statements, Rent Rolls and OSARs (OSAR) Best Practices The OSARs working group was created to establish best practices for the delivery and information flow of Operating Statements, Rent Rolls and OSARs. The full committee has formed two sub groups, one for Master Servicers and one for Special Servicers. Both groups have reviewed the final best practice draft which is expected to be adopted by year’s end. 17g-5 Best Practices Effective June 2010, The Securities and Exchange Commission (SEC) promulgated a regulation, 17g-5, which imposed additional disclosure and conflict of interest requirements on nationally recognized statistical rating organizations (“NRSROs”) and, by extension, additional disclosure requirements on issuers, sponsors, and underwriters (collectively, “arrangers”) of structured finance products. Last fall CREFC formed a 17g-5 working group to address ongoing implementation issues relating to the flow of information through 17g-5 websites between Servicers, Rating Agencies, and IP Providers. Issues include timing of web posts, push confirmations, and technological issues, and inconsistent PSA language. Based on member comments received, the CREFC Forums are expected to adopt best practices #1 through #7 by year’s end. Best practices #8 and #9 will be incorporated at a later time. This working group also plans to engage the SEC to determine whether 17g-5 applies to servicer reviews and post-securitization, among other things. Special Servicer Transfers Best Practices The Special Servicers Transfers working group is addressing the challenges that arise when dealing with the transfer of the named Special Servicer on a CMBS trust, including the flow of information and documents between Servicers, RACs, logistical and timing issues, appraisals, and reporting/communication issues. The working group co-chairs have received input from rating agencies and investors on a final draft, which is expected to be adopted by year’s end. Credit Rating Agency Data Standardization Project CREFC created a working group to explore the possibility of developing a standardized set of data that Master Servicers and Special Servicers will provide simultaneously to all Rating Agencies on a quarterly, semi-annual and annual basis. T Dan Olsen Senior Vice President KeyBank Real Estate Capital
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