The Role of the Borrower Advocate

The primary objective of a borrower advocate is to:

1) Educate a borrower on the CMBS structure, special servicer objectives, approval parties, etc.
2) Help the borrower understand its available options for the situation
3) Serve as an “interpreter” between the borrower and the special servicer

Educate
For a borrower to have a successful outcome; it must understand whom the approval parties are, what drives the decision of the special servicer, how the current pool dynamics affect the decision, as well as the limitations of a loan in a REMIC structure.

The borrower advocate must have an intimate knowledge of REMIC structures, Pooling and Servicing Agreements (PSAs), trustee reports, special servicer dynamics, and basic loan documents. The borrower advocate will spend about ½ of its time educating and informing the borrower on a transaction.

Understand Options
Even the most sophisticated borrowers think that there are only two options when a CMBS loan is not performing: (1) fund out of pocket to keep the loan current, or (2) hand the property back to the “Lender”. They often think the answer to any request will always be NO.

One of the key roles of the borrower advocate is to inform the borrower of all the available options based on a number of criteria: (a) special servicer, (b) asset manager within the special servicer, (c) current status of the pool and bond losses, (d) remaining life of the loan, (e) future projections for the property, (f) current and future value of the property, etc.

Interpreter
The borrower advocate serves as an interpreter between the needs of the commercial property owner and the requirements of the special servicer to the bondholders. Ultimately, the only way a modification works is if both objectives are met and the needs of the bondholders are very different than the needs of the property owner. The borrower advocate must be able to interpret property projections and performance to bond lingo.

Another role of a highly successful borrower advocate is to serve as a caring ear to the borrower’s challenges in a CMBS structure. CMBS structures are very frustrating for owners and sometimes the best thing a borrower advocate can do is to care!