By Kevin Duty –
CMBS loans are notorious for their rigid and “mystical” restrictions on what can and can’t be done with loan terms and collateral after the loan closes. Since securitized loans serve as the collateral for investment grade bonds, the U.S. Treasury has issued very strict guidelines, governing allowable transactions, known as “REMIC” statutes. To further confuse the situation, the Treasury, in 2010, issued revised rules that changed what is and is not allowable after a loan has closed.
While your loan originator will try to help you document any action you might want to undertake with the loan/collateral in the loan documents in the future, it is virtually impossible to anticipate every possibility that might arise. The challenges occur when a borrower wants to complete an action on their performing loan/property that is not contemplated in the loan docs. Master Servicers are much more restricted on what they can do on a performing loan than a Special Servicer is on what they can do on a non-performing loan. And it seems so counterintuitive to an owner that you can’t always be “proactive” on a CMBS loan by trying to “prevent a problem” before there is one.
In the “old” days, if it wasn’t in the loan docs, it probably didn’t happen. With the advent of the revised REMIC rules, that isn’t necessarily true any longer. And while they also resulted in the fact that things that ARE in the loan docs might NOT be allowed to happen, the new rules provide “safe harbors” that allow lenders to approve some transaction not contemplated in the loan docs, without risk of violating REMIC statutes.
The trick is; knowing how to navigate the safe harbors and how to get the Master Servicer to work with you to achieve your goals and complete your transaction.
That is exactly what 1st Service Solutions was created for – to help owners navigate the treacherous CMBS waters for performing and non-performing loan. Our team has extensive hands-on experience in the servicing shops and our founder, Ann Hambly, has led many of the large servicing shops in her career prior to creating 1st Service Solutions. We understand REMIC rules, old and new, and can help you understand how to accomplish your objective for your property within the REMIC rules.
Give us a call for a free consultation so you know what your options are.