Contacting the Servicer of your Loan can be a daunting task; and the existence of a pandemic of national proportion has certainly added another layer of challenges to the process. Having the right tools and information can clearly identify property or Loan issues, which facilitates a path to find solutions quickly and reduces anxiety of a stressful process. As a Senior Special Servicer for over 15 years at a top-tier financial institution I have found that the following steps can help you to achieve your goals.
Tool #1: Historical and Current Financial Statements
“What is your story and why should I help?” This is what the Servicer is listening for in the initial conversation. With hundreds of loans in their pipeline and Borrowers calling non-stop, the Servicer wants a clear, concise explanation of property operations and the underlying issues. The ability to articulate historical performance and the current dilemma of your asset is critical. Did occupancy decrease sharply? If so, can you quantify by how much and why? Has occupancy been consistent, but revenues have decreased because tenants are unable to pay? Providing 2-3 years of historical financial statements and quantifiable answers to the Servicer helps them help you. In addition, the Lender will want to understand the status of any tenants in arrears or in bankruptcy. The more detailed the AR and Leasing status reports, the better.
Tool #2: Mindset
Many Borrowers make the mistake of approaching the Servicer with emotions instead of facts. The Servicer is NOT your partner! As previously stated, the Servicer’s goal is to be repaid at or prior to loan maturity. Any concessions granted by the Servicer to reach this goal require compensation. Modification or consent fees can average up to 1% of your loan balance depending on the complexity of the request. Knowing what to expect during the loan resolution process and providing pertinent and factual information is key to a quick resolution.
Tool #3: Exit Strategy
The main goal of a CMBS loan Servicer is to maximize recovery for the trust/bondholders. The likelihood of the Servicer granting loan relief or modifying loan terms is directly correlated to an increased probability of your loan being repaid at or before maturity. There needs to be a defined “IF-THEN” scenario, i.e., IF the Servicer grants your request to forego principal curtailments for 12 months, THEN, current cash flows can support re-tenanting vacant space and stabilize revenues for a loan refinance at maturity. This rationale enables the Servicer to support “WHY” they should grant your request.
Tool #4: Consent Package
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. The consent package should provide complete and accurate information, credit analysis on tenant income, and proforma budgets all supported by market data which increases the probability of modification substantially. An experienced CMBS Advisor can provide a concise and complete package which can be reviewed and approved expeditiously.
Tool #5: Experienced CMBS Advisor
A full-service advisory team should be comprised of bankers, underwriters, former special servicers, and attorneys from top tier organizations. Their knowledge and relationships within the bank and servicing areas can create a path to success and achieving the optimal outcome for the Borrower. Enduring the loan servicing process can be overwhelming. The action from the Servicers is constantly changing as the market evolves, many of the changes may be caused by other market forces. Choosing experienced professionals with real-time knowledge of all aspects of the process is critical.
