Forum Spotlight: Servicers
March 20, 2023
Together, Stacy Ackermann, Leslie Hayton, Rich Carlson, Carl McLaughlin, Andrea Helms, Tony Yousif and Niral Shah form the “Leadership Working Group” for the Servicers and Special Situations Forum. The group sets agendas and priorities for the Forum, as well as represents the constituency on CREFC’s Policy Committee.
What’s new: In January, the forum debuted its new expansion as we combined the servicing administration and special situations forums. The Special Situations component newly incorporates the special servicing/special situations and distressed asset management as part of the forum. The decision to evolve and formally combine servicing administration and special situations was due to feedback from members regarding current market conditions and related pressing issues that the members want to explore and address.
The newly recast forum will have two sets of leadership – one representing servicing administration and the other representing special situations. Importantly, both sets of leadership will continue to work together to address all aspects of member interests and concerns.
Key Servicer Focus Areas
- Monitoring and tracking servicing activity
- Transfers of interest and assumptions
- Distressed asset resolutions for securitized and portfolio assets
- Floating rate - transitioning away from LIBOR
- Collateral Valuation
What they’re saying: Discussions at the January conference focused on the following points:
- Payoff efficiencies and success during 2022
- Increased defeasance volume – will it continue in 2023?
- Moderate uptick in transfers of interest and assumptions
- Increased requests for rate cap modifications and differences across portfolio vs securitized
- Continued valuation uncertainty - impact on default resolution/enforcement and servicer advances
- Bespoke distressed asset resolution requests and approaches
Looking ahead, servicers are highly focused on current market conditions and the impact on maturing loans and default resolution and enforcement. The forum leadership expects our forum discussions at the June conference to focus on the current state of the market and what servicers are seeing as “boots on the ground” with respect to the point of contact with borrowers.
Key Policy Issues:
- SEC’s Conflicts of Interest in Securitization Proposal. The proposal would limit CMBS and CRE CLO sponsors from certain transactions in the first year after issuance. CREFC is asking for express exclusion for servicers from being treated as a “sponsor” under the regulation.
- LIBOR transition: US Dollar LIBOR is scheduled to cease being published on a representative basis beyond June 30, 2023. Servicer Forum members and CREFC have published the CREFC LIBOR Legacy Playbook, which is designed to address operational issues related to transitioning floating-rate loans currently indexed to LIBOR to the recommended SOFR index plus the ARRC recommended spread adjustment or another contractually agreed-upon benchmark.
What’s Next: Forum Leaders are seeking nominations for the next Chair Elect to join their leadership slate and look forward to presenting CREFC members with an update on their forum at the Annual June Conference in New York City.