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