1 Loan and REO Liquidation Reporting Best Practices OVERVIEW The global economic downturn in prior years resulted in an increase in the volume of specially serviced assets in the CMBS market, which led to challenges for Servicers to report consistent and timely details regarding liquidated assets. As a result, Bondholders requested more transparency and disclosure regarding the circumstances related to Loan and REO resolutions (liquidations). In response to Bondholders concerns, CREFC introduced in January 2013, the Loan and REO Liquidation Reports which enable Special Servicers to deliver effectively to Bondholders more detailed information such as fees, affiliate transactions, and the Special Servicer’s rationale for actions taken on final Loan or REO resolutions. CREFC created narrative language to provide logistical clarification for Special Servicers on the reporting process, and each Special Servicer developed a form based on CREFC’s templates to produce and include the level of detail investors were seeking. Establishing a process to proactively report details regarding Loan and REO resolutions provided increased transparency and disclosure, but Servicers and Bondholders recognized the need to establish consistent practices to improve the consistency and depth of information included in the Loan and REO Liquidation Reports. This document contains best practices for CMBS Special Servicers, Master Servicers and Certificate Administrators to: 1) Clarify the types of resolutions to be reported in the Loan and REO Liquidation Reports 2) Confirm the timing in which the reports should be sent by the Special Servicer to the Master Servicer and Certificate Administrator 3) Provide guidelines to locate Loan and REO Liquidation Reports from Certificate Administrators websites 4) Create a database to identify current contact information and submission requirements for the various Master Servicers and Certificate Administrators 5) Provide Loan and REO Liquidation Report examples for typical resolution scenarios RESOLUTION SCENARIOS Upon the occurrence of the Final Recovery Determination, the Special Servicer should complete a Loan or REO Liquidation Report and submit with the corresponding CREFC Realized Loss form. (Not applicable for partial liquidations). To clarify, the following liquidation scenarios should have a Liquidation Report completed by the Special Servicer: Multi-property collateralized Loan/REO; upon final sale of remaining collateral Full Payoffs/Discounted Payoffs (even those with no realized loss to the Trust) LIQUIDATION REPORTING TIME FRAME The Special Servicer should provide the Liquidation Reports to BOTH the Master Servicer and the Certificate Administrator either in the reporting period in which such resolution occurs but no later than the following reporting period. For transactions that do not have a Certificate Administrator, the Special Servicer will continue to send the templates to the Master Servicer at a minimum. In addition, the Master Servicers will also send the Liquidation Reports in their monthly reporting package to the Certificate Administrators. It is recommended that the Certificate Administrators upload the Liquidation Reports to their website by the Distribution Date for the reporting period in which the Liquidation Report was received. There may be times in which the Certificate Administrator will upload the Liquidation Report prior to the Distribution Date for that reporting period. Furthermore, Certificate Administrators should try to maintain the standardized naming convention of the Liquidation Report established by the Special Servicer when uploading the reports to their sites. If the
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Loan and REO Liquidation Reporting Best Practices
OVERVIEW
The global economic downturn in prior years resulted in an increase in the volume of specially serviced assets in the
CMBS market, which led to challenges for Servicers to report consistent and timely details regarding liquidated
assets. As a result, Bondholders requested more transparency and disclosure regarding the circumstances related to
Loan and REO resolutions (liquidations). In response to Bondholders concerns, CREFC introduced in January 2013,
the Loan and REO Liquidation Reports which enable Special Servicers to deliver effectively to Bondholders more
detailed information such as fees, affiliate transactions, and the Special Servicer’s rationale for actions taken on final
Loan or REO resolutions.
CREFC created narrative language to provide logistical clarification for Special Servicers on the reporting process,
and each Special Servicer developed a form based on CREFC’s templates to produce and include the level of detail
investors were seeking. Establishing a process to proactively report details regarding Loan and REO resolutions
provided increased transparency and disclosure, but Servicers and Bondholders recognized the need to establish
consistent practices to improve the consistency and depth of information included in the Loan and REO Liquidation
Reports.
This document contains best practices for CMBS Special Servicers, Master Servicers and Certificate Administrators
to:
1) Clarify the types of resolutions to be reported in the Loan and REO Liquidation Reports
2) Confirm the timing in which the reports should be sent by the Special Servicer to the Master Servicer
and Certificate Administrator
3) Provide guidelines to locate Loan and REO Liquidation Reports from Certificate Administrators
websites
4) Create a database to identify current contact information and submission requirements for the various
Master Servicers and Certificate Administrators
5) Provide Loan and REO Liquidation Report examples for typical resolution scenarios
RESOLUTION SCENARIOS
Upon the occurrence of the Final Recovery Determination, the Special Servicer should complete a Loan or REO
Liquidation Report and submit with the corresponding CREFC Realized Loss form. (Not applicable for partial
liquidations). To clarify, the following liquidation scenarios should have a Liquidation Report completed by the
Special Servicer:
Multi-property collateralized Loan/REO; upon final sale of remaining collateral
Full Payoffs/Discounted Payoffs (even those with no realized loss to the Trust)
LIQUIDATION REPORTING TIME FRAME
The Special Servicer should provide the Liquidation Reports to BOTH the Master Servicer and the Certificate
Administrator either in the reporting period in which such resolution occurs but no later than the following reporting
period. For transactions that do not have a Certificate Administrator, the Special Servicer will continue to send the
templates to the Master Servicer at a minimum. In addition, the Master Servicers will also send the Liquidation
Reports in their monthly reporting package to the Certificate Administrators.
It is recommended that the Certificate Administrators upload the Liquidation Reports to their website by the
Distribution Date for the reporting period in which the Liquidation Report was received. There may be times in
which the Certificate Administrator will upload the Liquidation Report prior to the Distribution Date for that
reporting period. Furthermore, Certificate Administrators should try to maintain the standardized naming convention
of the Liquidation Report established by the Special Servicer when uploading the reports to their sites. If the
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Certificate Administrator changes the name of the Liquidation Report established by the Special Servicer, it is
preferred for ease of reference that the revised name be similar to the name established by the Special Servicer.
The Special Servicer responsible for an asset upon the occurrence of the Final Recovery Determination should
produce the Liquidation Report for that asset even if that Special Servicer is subsequently replaced.
LIQUIDATION REPORTS ON CERTIFICATE ADMINISTRATOR WEBSITES
The below link contains information on where to locate the Loan and REO Liquidation Reports on a Certificate
Administrator’s website and if a report name has been changed.