medium · Asset-Backed Securities
In a CMBS transaction, what occurs when an 'Appraisal Reduction Amount' (ARA) is triggered on a delinquent loan?
- It immediately forces the borrower to pay down the loan to a 60% LTV ratio.
- It reduces the amount of interest advances the servicer must make, potentially leading to interest shortfalls on junior bonds.
- It allows the servicer to stop collecting payments from the underlying tenants.
- It shifts the control of the deal from the B-piece buyer to the AAA holder.
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