KBRA Releases Research – CMBS Servicing and Modifications During COVID: A Two-Year View

KBRA releases a report analyzing CMBS special servicing and modification activity in the two-year period following COVID’s onset in March 2020.

Servicers performed admirably in facing an unprecedented wall of distress for the industry regarding both the rapidity and volume of relief requests and payment defaults in a relatively short period. Master and special servicers worked together to respond in a manner that allowed for short-term borrower relief in an economy that saw a 32.9% decline in GDP in the early months of the pandemic. In fact, by loan count, over 50% of the modifications performed after the start of the pandemic were effectuated without having the loan being transferred to the special servicer. This was not common in CMBS before COVID. A positive impact of this approach was limiting special servicing fees that would have otherwise been borne by the borrower and/or certificateholders, as well as staving off defaults and losses. For loans that did ultimately transfer to the special servicer, 44.5% have been corrected and returned to the master servicer while another 14.6% were paid off or resolved, with a large majority not incurring a loss.

Click here to view the report.

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About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

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