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What the F#%$ is a Special Servicer and How do I Manage Them?

9/17/2012

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Over the last three years, the special servicer has emerged as a prominent fixture in the real estate world.  Special servicers have always been a component of the real estate world, but it is the glut of matured and defaulted debt on the market that has given rise to the almighty special servicer.

Just so we are all on the same page:  Special servicers effectively serve as middlemen to troubled loans.  A special servicer services loans that are delinquent in repayment, matured without pay off, or are current but have some sort of existing credit issues with the tenants or borrowers.  Loans enter special servicing when they are more than 60 days behind in payments, have matured, or a default has occurred or is imminent.  Depending on the situation, the special servicer has leeway to modify/extend the loan, agree to a forbearance/workout, or they can choose to foreclose.  The special servicer is contractually bound to act so as to maximize recovery for the lender/note holder. 

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