Servicers have found a way to make the borrower experience WORSE in CMBS!

The industry has been focused on developing ways to make the borrower experience better in CMBS. AND YET……in some recent securitizations, the SPECIAL SERVICER has negotiated in the right to review and approve certain reserve disbursement requests, on a standard disbursement on a performing loan. On the surface, this may not sound too bad, but let me recap the process now for these reserve disbursements and you will see that it is BAD NEWS.

1. The borrower submits the extensive draw request along with the 6,000 pounds of backup data to the master servicer as usual, and often to the “generic reserve disbursement at master servicer.com”
2. The master servicer starts its usual review process and somewhere in that process realizes this particular pool requires the special servicer’s approval, so they send the request to the special servicer
3. The special servicer ‘intake person’ gets the request and assigns an asset manager to review the request. You are most likely 3 weeks into the process at this point!
4. The special servicer then sends a Pre-Negotiation Agreement to the borrower- YES! A Pre-Negotiation Agreement for a standard reserve disbursement on a performing loan!
5. Then, the special servicer asks the borrower for a series of documents to support the reserve disbursement request. YES! The documentation originally submitted to the master servicer doesn’t work now, but the borrower won’t know this until this point in time in the process
6. After the borrower signs and returns the Pre-Negotiation Agreement and all the documents required, the special servicer STARTS its review and from this point in the process, it will likely take 3 weeks for the special servicer review
7. Once the special servicer has completed its review, the special servicer notifies the master servicer that it is okay to disburse the funds

This entire process will likely take 6 – 8 weeks, if not longer.  BEWARE!