Andrew Pearlstein, Ralph Stone, and Rachel Gould Published in Asset Securitization Report
"Securitization’s Impact on Distressed Commercial Assets"

Andrew Pearlstein, Ralph Stone, and Rachel Gould's article, "Securitization’s Impact on Distressed Commercial Assets," was published in the January 5, 2009 issue of Asset Securitization Report. In their article, the authors discuss how, for the first time since its inception in the early 1990s, the U.S. CMBS market and CMBS servicer capabilities are being tested by the very economic stress that was the impetus for the creation of the CMBS market. According to the article, "The servicing of distressed real estate loans is presenting many problems for borrowers as their loans become troubled due to the continued downward spiral of the market."

The authors further explain that one of the major challenges for borrowers are the many restrictions on CMBS loans, which severely limit the flexibility of loan servicers when working out distressed loans. As a result, many loans that may have been worked out in the past cannot be worked out due to the fact that the loan has been securitized. The authors conclude, "In a workout of a securitized loan, the special servicer is constrained by the real estate mortgage investment conduit (REMIC) rules and the pooling and servicing agreement (PSA). Due to the various relationships, the special servicer may not be familiar with the loan history. Notwithstanding, the limitations imposed on the special servicer, a loan may be successfully modified if care is taken to abide by the applicable requirements."