FAQs

A: The initial conversation should start with the Servicer of your Loan, which is the party you send your loan payments to. There are three types of Servicers: Sub, Master and Special. A Sub Servicer is typically associated with the Mortgage Company that originated your loan. The Sub Servicer’s authority is governed by a sub-servicing agreement and is typically limited to document administration. The Master Servicer’s actions are governed by the Pooling and Servicing Agreement (“PSA”), which dictates the guidelines and authority the Master and Special Servicer possess. The Master Servicer is the main document and collections administrator. The Master Servicer performs loan covenant tests and other administrative responsibilities, such as tax and insurance payments and managing the property reserves. The Special Servicer is responsible for any actions and decisions on the mortgage loan that are out of the realm of responsibility of the Master Servicer.

Complicated? Engaging a CMBS Advisory Firm with experienced professionals and contacts throughout the CMBS industry is critical and can make this process seamless and less costly more efficient and produce a successful outcome.

A: If you send a two-sentence proposal email you will NOT get your problem reviewed or resolved quickly. Providing the Servicer with a presentation that anticipates the Servicers questions and documentation needs which can be analyzed quickly and efficiently will have a much better chance of getting your request reviewed in a timely manner. An experienced CMBS Advisor can provide a concise and complete package which can be reviewed and approved expeditiously.

A: Understanding the process of CMBS Servicing, applicable parties, and approval rights helps to set expectations and mitigate anxiety of a stressful situation. Depending on the nature of the request, next steps may include, (but are not limited to), the loan being moved to Special Servicing (which will result in the accrual of Special Servicing fees), an appraisal, an environmental assessment, various consents from the special servicer, subordinate loan holder(s), or the Controlling Class Holder, as well as rating agency review. An experienced CMBS Advisory firm informs the client of the anticipated timeline and potential fees at the beginning of the process.

A: Yes. In a CMBS loan it is necessary to understand how any modification or consent affects the entire REMIC Trust. Many issues that a balance sheet lender may be able to easily address could be “non-starters” because of REMIC rules and the Pooling and Servicing Agreement. Examples of probable non-starters are: additional debt of the Borrower (unless it’s already provided for in the loan documents), long term extensions without a capital infusion (i.e. typically greater than 12 months), and change of use of collateral. A well-seasoned Advisor with CMBS legal and Special Servicing experience is invaluable when requesting Loan relief from the Servicer to understand what is achievable and avoid time delays and unnecessary legal fees.

A: Defeasance is the substitution of the real estate collateral with government securities (typically US treasuries) that mimic the loan payment requirements. In the current interest rate environment, to mimic the payment stream, securities in an amount greater than the outstanding balance of the loan may need to be purchased, resulting in the payment of a defeasance premium. In addition to the cost of purchasing the securities, the Borrower is responsible for the payment of Servicer’s costs and other related expenses which typically total in the $30,000 to $50,000 range.

A: A full service advisory team should be comprised of bankers, underwriters, former special servicers, and attorneys from top tier banking organizations. Their knowledge and relationships within the various lenders and servicing shops can create a path to success and achieve the optimal outcome for the Borrower. Dealing with loan servicers can be daunting as the actions of the Servicers are constantly changing as the market evolves. Choosing experienced professionals with real-time knowledge of all aspects of the process is critical.

A: An experienced team of CRE bankers who have experience as Loan Workout Advisors, will understand and have access to the resources necessary to cure a defaulted loan or loan extension. Access to equity and/or obtaining debt ensures the creation of an optimal customized solution for your asset.

A: Competent legal counsel is critical to the loan modification process as they will offer legal advice and be responsible for the documentation of any modification. However, engaging legal counsel to speak with the Servicer requires the Servicer to involve their counsel in the discussions, adding to legal fees and the complexity of the negotiations. A full-service Advisory Firm can engage with the Servicer to propose and negotiate the business terms of a loan modification while keeping your attorney informed and part of the process.