| Title: | MBA Drives Development of New Seismic Risk Assessment Standards |
| Source: | MBA |
| Date: | 6/28/2007 |
Contacts:
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Washington, D.C. (June 28, 2007) - For the last three years, the Mortgage Bankers Association (MBA) and their Seismic Work Group have been actively working
with the American Society for Testing and Materials International (ASTM) to revise E2026-99 - the Standard Guide for the Seismic
Risk Assessment of Buildings - and to develop a new seismic risk assessment standard for commercial mortgages that are intended
to be securitized. Since careful review of third party reports is an integral element of the underwriting process of commercial/multifamily
properties, and part of this process is the review of Seismic Risk Assessments (SRAs) for properties located in areas that
are highly prone to earthquakes, MBA has led the effort to develop standards that can be widely adopted by commercial real
estate finance companies, due diligence consultants and rating agencies.
"ASTM is one of the largest voluntary standards development organizations in the world and is an important source for technical
standards for materials, products, systems, and services," said Tom Kosonen, Managing Director, Bear, Stearns & Co. and Chair
of MBA's Seismic Work Group. "In working with ASTM over the last few years, we have truly achieved our main goal, that being
the official release of these two integral seismic risk assessment standards."
For commercial real estate loans that are made in areas of the country with a significant degree of earthquake activity, lenders
typically require an earthquake probable maximum loss study (PML study) in order to fund a loan. The purpose of the PML study
is to examine the potential susceptibility of a commercial project to earthquake damage. For those properties that have a
significant likelihood of sustaining earthquake damage of over 20 percent of property value, most lenders require earthquake
insurance to be in place.
However, the lack of a widely adopted earthquake PML study standards has caused a wide variation in earthquake PML study results
and concerns have been raised within the industry. Consequently, MBA formed the Seismic Work Group to work with ASTM to revise
E2026-99 (now E2026-07) in a manner that would allow for its more widespread adoption and enhanced seismic risk assessment
uniformity while creating the Standard Practice for Probable Maximum Loss Evaluations for Earthquake Due-Diligence Assessments
(E2557-07) document, which is intended to address securitized mortgages.
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The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry
that employs more than 280,000 people in virtually every community in the country. Headquartered in Washington, D.C., the
association works to ensure the continued strength of the nation's residential and commercial real estate markets; to expand
homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and
fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety
of publications. Its membership of over 2,200 companies includes all elements of real estate finance: mortgage companies,
mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending
field. For additional information, visit MBA's Web site: www.mortgagebankers.org.