CC_S_200.5 Commercial/Multifamily Default Management

Servicers must act to identify early warning signs of default. They perform annual inspections and either quarterly or annual reviews of financial reports to try to identify potential problems early in the process. Effective communication with the borrower is essential in determining the underlying cause of the problem, whether the problem is with the borrower, the property, the market, or some combination thereof. Once the servicer determines the problem, it must evaluate what course of action makes the most economic sense. Each situation is unique, but the main factors to consider are whether the borrower is willing to cooperate, whether or not the borrower has a realistic sense of the situation, and whether or not the borrower has the necessary skills to turn the property performance around.

CMF Default Management examines the ways in which servicers handle borrower default. It begins with an overview of the ways in which servicers handle default for CMBS, portfolio, and agency loans. It looks at the most common default collection strategies, including modification or restructuring, forbearance, discounted payoff, deed-in-lieu of foreclosure, sale or refinance of the collateral, and loan sales. This section of the course ends with an interview with a default servicing expert. The course then examines bankruptcy code, various types of bankruptcy, and their implications for servicing. It then describes the basics as well as variations of foreclosure and the implications of foreclosure for the lender. Finally, the course ends by examining servicer responsibilities related to real estate owned (REO), the properties obtained through foreclosure.

This is a commercial/multifamily course.