medium · Asset-Backed Securities asset-nuances

A CMBS 'Special Servicer' manages a defaulted loan. If the servicer elects a 'Workout' (modification) rather than a 'Liquidation' (foreclosure), what is the typical fee structure impacting the trust?

1. No fees are charged to the trust because the borrower pays all modification costs directly to the trustee.
2. The servicer is only paid if the loan is successfully sold to a third-party B-Piece investor.
3. The servicer receives a 1%-2% fee based on the original par value of the loan at the moment of default.
4. A monthly workout fee (e.g., 0.25%-0.50%) applies as long as the loan remains in modified status.

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