CDOs, MBSs, CMBS, CMOs

workouts, servicers and their fees

Posted on Tuesday, April 14, 2009

The CMBS servicer often has a big impact on workouts. Withint the master servicing organziations there is often a division of servicing functions such as monitoring of payments, escrow analysis, financial statement review, reserve advancement, etc.

Once in default the loan is sent to a special servixcer with expertise in loan work outs and often a financial interest in the CMBS trust that owns loans, thereby creating more of an alignment of economic interests (for that particular owner but not perhpas for others). On the otehr hadn, as the new guy on the scene the special serviceer has no backgound or hisotry on the loan, collateral or borower.

Master servicers may be paid from the "float" on funds recevied from borrowers. The servicing fee is often less than a point and based on the outstandignloan balance. As a CMBS pool seasons, the master servicer is paid less but the loans may require more work.


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