Commercial mortgage mods at the mercy of special servicers

Despite signs of an economic recovery, defaults on commercial mortgages bundled into securities keep reaching new highs. The ever-rising default rates are putting in the spotlight so-called special servicers, companies that represent holders of commercial-mortgage-backed securities (CMBS), when the loans underlying these securities are in default or imminent default. Unlike home mortgages, soured CMBS loans are at the mercy of only a handful of special servicers, including LNR Property Corp., owned by private-equity firm Cerberus Capital Management LP, and CW Capital, majority owned by Canadian pension manager Caisse de depot et placement du Quebec. How these servicers behave significantly impacts a CMBS deal’s cash flow and expected losses to bondholders.