easy · Asset-Backed Securities
A 'Controlling Class' in a CMBS transaction is defined as the most subordinate tranche still outstanding.
Why is the representative of this class granted the power to hire and fire the 'Special Servicer'?
- They have the most 'skin in the game' for maximizing the recovery on troubled loans.
- They are typically the largest investors in the AAA tranches.
- They provide the initial cash funding for the special servicer's operating budget.
- It is a regulatory requirement under Dodd-Frank for all asset classes.
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