Recent articles regarding the "loss of documentation" for $1 billion of commercial mortgage loans backing FULBA 98-C2 have drawn the CMBS market's attention to the issue of whether the delivery and ongoing monitoring of underlying loan documents in the CMBS market is a widespread problem. We believe it is. One of the frequent questions from market participants regarding FULBA 98-C2 has been, how could $1 billion worth of loan documents be missing? While the incredulity of the questioners is understandable, it underscores the market's lack of awareness of the convoluted document trail involved in the CMBS securitization process and the role of key players in it.

This report is designed to increase the market's understanding of how this process occurs, the role of key players in it, such as the Loan Seller or Conduit, Trustee, Custodian, the Master and Special Servicers, and in so doing draw attention to this large potential issue in the market. Like the bridges and infrastructure of a municipality, these issues tend to be boring, unsexy, yet critical issues that rarely get any-one's attention until a situation arises. Indeed it has been the exceedingly low to practically non-existent default rates in the CMBS market that mask this underlying problem. Yet given the potential impact of missing loan documents on the ability of a servicer to minimize losses in the case of a loan default, it is critical that the market, rating agencies and the Commercial Mortgage Securities Association (the CMSA) address this problem while defaults are low.

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