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CRE Finance World, Winter 2012

CMBS Servicer Workouts Maintain an 86% Recovery Rate Figure 6 The average balance of PIF loans was $11.8 million, and average 2010–Sept 2011: Note Sales time in special servicing was eight months. Due to servicing fees or other expenses, the recovery rate is not always 100% on PIF loans as might be expected. Figure 8 2010–Sept 2011: Paid in Full Discounted Payoffs: DPOs account for one of the largest liquidation methods for the period, at 22% by loan count. The recovery rate for all DPOs is 70.8% however, excluding ESH, which was resolved with virtually no losses to the trust portion of the loan, the recovery rate falls to 56.0%. Also, the average balance of loans that resolved using DPO falls to $9.0 million without ESH. The average time in REO Liquidation and Sold at Foreclosure: REO liquidation and sold special servicing was 14 months. Midland’s resolution timing is at foreclosure combined account for 27% of all liquidation methods higher, at 19 months, but its portfolio has a disproportionate number and only 19% of all resolutions by loan count. The recovery rate for of small balance loans, and the average time in special servicing these two methods is the lowest of all recovery methods, as it takes for those loans tends to be higher than for typical conduit or the most time, usually involves litigation and, therefore, usually has large loans. the highest costs associated with it. The average balance for REO liquidation and sold at foreclosure was $7.2 million, and the average Figure 7 time in special servicing was 22 months. CMBS special servicers 2010–Sept 2011: DPO typically use this liquidation method after exhausting all workout attempts with the borrower. This method generally returns the highest loss severities; therefore, servicers use it prudently. Figure 9 2010–Sept 2011: REO Liquidated and Sold at Foreclosure Paid in Full: PIF also accounts for the second highest liquidation method, along with DPO, at 22% of all liquidation methods and 15% of total resolutions for the 21 month period. By balance and by loan count, LNR had the most PIF. They also have the greatest percentage of CMBS special servicing assignments in the market. CRE Finance World Winter 2012 60


CRE Finance World, Winter 2012
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