Demand for CMBS Loan Workouts Increases as More Borrowers Default

As more commercial real estate borrowers across the country are missing payments or defaulting on their commercial mortgage-backed securities (CMBS) loans, demand for special servicers to assist with workouts has increased exponentially. This June, the CMBS loan delinquency rate reached 8.4%, triple the level from last year according to Trepp. Since the lion’s share of that workout business is handled by just a few special servicers, the volume of the workouts is overwhelming special servicers and borrowers alike, according to Todd Moore, Executive Vice President at 1st Service Solutions, a Dallas-based advisory company, and the first firm dedicated to serving as a borrower advocate in loan restructurings and assumptions.

“The special servicers must feel like they are drinking from a fire hose with the sheer number of workouts needed right now,” says Moore. “The magnitude of the problem has definitely had an impact on the approach special servicers are taking when it involves working out a defaulted loan.” Special servicers have had to hire additional staff to keep up with the volume of workouts and are also employing unique processes.  The most important thing for borrowers to remember is to work closely with a special servicer to jointly come up with the best option available for the borrower’s particular situation, notes Moore.

Moore recently addressed these issues in a June 9 webinar, CMBS Loan Workouts, Modifications and Maturity Extensions, presented by 1^st Service Solutions and the BSC Group, and moderated by MiniStorage Messenger.

Moore is available to discuss CMBS loan workouts and how borrowers can work with special servicers to achieve a feasible workout plan. [06/10/2010]