System and method for performing lease-by-lease cash flow and risk analysis in the commercial backed securities (CMBS) environment

• US 20100063921A1
• Filed: 09/10/2008
• Published: 03/11/2010
• Est. Priority Date: 09/10/2008
• Status: Abandoned Application

• Current Assignee: James E. Flaherty
• Original Assignee: James E. Flaherty
• Inventors: Flaherty, James E.
• Application Number:
  US12/207,875
• Publication Number:
  US 20100063921A1
• Time in Patent Office: Days
• US Class Current: 705/38
• CPC Class Codes: G06Q 40/02 Banking, e.g. interest calculation or account maintenance credit or loans G06Q40/03
• CPC Class Codes: G06Q 40/03 Credit; Loans; Processing thereof
• CPC Class Codes: G06Q 50/16 Real estate

Abstract

Participants to the commercial mortgage backed securities (CMBS) market enter data unique to their property via a web-based application that applies underwriting assumptions and/or methods of transforming income and expense information into a format acceptable to the CMBS industry. The resulting data set is suitable for analysis by lenders, third party credit rating companies, and investors thus standardizing and simplifying the process of obtaining a loan, the need for lenders to perform standardized underwriting analysis, and the transfer of this analysis to both the rating agencies and the investors. The disclosed methods and procedures greatly simplify how loans enter into the CMBS market and how investors analyze the performance of loans already in the CMBS market.

Claims

1. A method of calculating underwriting assumptions for proposed loans, the method comprising the steps of:

a) assigning a name or other identifier to each commercial property;

b) associating one rent roll to each underwriting;

c) presenting a rental calculation method by allowing entry of either Actual Contract Rent or Gross Up Vacant Space at Market;

i. if Actual Contract Rent is selected, only in-place contract rent will be used in calculating Potential Gross Income;

ii. if Gross Up Vacant Space at Market is selected, vacant units are assigned revenue based upon market rents and the resulting revenue is labeled Income from Vacant Units;

d) presenting a rental rate or Rate to Use as either being Actual, Market, or Lesser of Actual Market wherein;

i. Actual uses the amount of contract rent;

ii. Market uses a market rents and adjusts the contract rent by a Mark to Market NOI adjustment; and

iii. Lesser of Actual Market uses the lesser of Actual or Market.

2. The method of claim 1 used for multifamily properties wherein in the presentation of rental calculation:

a) if Gross Up Vacant Space at Market is selected, the vacancy assumption is a straight percentage deduction;

or

b) if Actual is selected, and the actual vacancy is less than market vacancy, the vacancy adjustment is (Market Vacancy—

Actual Vacancy)*(Total Units/Occupied Units), if market vacancy is less than actual vacancy, no vacancy adjustment is made.

3. The method of claim 1 wherein for commercial or retail properties a Reimbursement calculation may be chosen form a Rent Roll method or from a Detail method such that:

a) if Rent Roll is selected, the values are from the rent roll tenant table;

or

b) if Detail is selected, the reimbursements are taken from the Pro Rata Expense detail section.

4. The method of claim 1 wherein underwriting assumptions applied to tenants, Unit Types may be over ridden by either Unit Type or Individual tenant by a plurality of values.

5. The method of claim 4 wherein the plurality of values include:

a) Market Rent

b) U/W Rent

c) Percent of Percentage Rent to Include

d) Vacancy

e) Average Lease Term

f) Renewal Probability;

g) TI New and TI Renewal;

h) LC New and LC Renewal; and

i) Reserves.

6. A method of calculating multi year underwritten cash flows comprising the steps of selecting:

a) number of years for the analysis;

b) year of sale;

c) discount rate;

d) cap rate; and

e) cost of sales

7. The method of claim 6 including the steps of selecting rental and roll over assumptions that include:

a) market rent growth;

b) underwritten rent growth amount;

c) down time between leases; and

d) roll over lease type.

8. The method of claim 7 wherein the rental and roll over assumptions to be selected include TI New, TI Renewal, LC New, LC Renewal and Cap Ex.

9. The method of claim 8 wherein the rental and roll over assumptions of claim 8 are entered as percentages.

10. A method of underwriting a proposed loan for later use in the Commercial Mortgaged Backed Securities (CMBS) instrument wherein the rental rates and vacancy rates may be calculated as the actual in place rates or calculated as projected market rates.

11. The method of claim 10 wherein a Debt Service Credit Ratio (DSCR) may be calculated by use of either actual in place rates or projected market rates.

12. The method of claim 11 wherein actual in place rental and vacancy rates are stored and displayed for one targeted audience and projected market rental and vacancy rates are stored and displayed for a different target audience.

13. The method of claim 11 wherein both objective and subjective factors may be used in calculating a DSCR.

14. The method of claim 13 wherein combinations of objective and subjective factors may be used and displayed in calculating a DSCR.

15. The method of claim 14 used by 3^rd parties to evaluate the risk of the underlying cash flow and the effect that the strength or weakness of that cash flow will have on the loan, on the pool of loans in the securitization, and the CMBS securities themselves.