Carp’s firm has also noticed a shift in the number of distressed properties that have been transferred to special servicing. “With our business, we have noticed a leveling off in terms of transfers, and the pace of resolutions has picked up dramatically. Our sales of REO have picked up dramatically, as well, over the past six to nine months.”

It’s important to note that all loans in special servicing – there is about $90 billion there currently – are not there because they are in default. “You’ve got to make a distinction between loans in default and loans in special servicing,” Maute asserted during the discussion. “Of the total, maybe 40% is there for reasons other than default.”

Stewart said CMBS resolutions have outpaced bank resolutions, primarily because of issues related to recourse. “Any bank under the FDIC [umbrella] has to deal with recourse,” he explained. “Banks are not likely to forgive recourse provisions, and those will hinder the pace of resolutions among the banks.”

Despite the slowdown in transfers and the increased pace of resolutions, the panelists believe even more properties will end up in special servicing. “There is a lot of opportunity to move loans into special servicing,” Carp said, acknowledging that more properties will likely fall into the distressed category as more loans mature and are unable to be refinanced.

Mazzetti offered this final thought: “Most of us on the especial servicing side of the business, we tend to be a little gloomy, and there’s not a lot out there that provides us hope that tomorrow will be a better day. Once we work though some of the property level distress related to occupancy, we walk right into refinancing again.”