You must serve the first ball and then the ball will not be returned (you will not get a counter offer). You will be required to re-serve the ball many times until you are fortunate enough to serve a ball the special servicer will respond to.

Every single borrower I talk to says the process feels like a one-sided negotiation. It is! The worst thing a borrower can do is to wait for the special servicer to propose a solution. The only solution a special servicer will typically make to a borrower is to pay the entire amount owed. As one of my special servicer friends has always said….”I was not the borrower's partner when cash flow was positive, so why would I be a partner now that there is a problem?”

Truth #3: The CCR is the entity in charge of important decisions on the property.

Very few borrowers know who the Controlling Class Representative (CCR) is for their CMBS pool and many borrowers believe that their relationship with the master servicer will be sufficient to see them through their time of need. The truth is that the master servicer has very little authority on a CMBS loan.

For decisions like a major lease approval, change of ownership or equity interest, addition of mezzanine financing, or waiver of any condition or term of a loan document, the approval of the special servicer and the CCR are required. This makes complete sense since the CCR is the one who will be hit with the next loss on the CMBS pool when there is one, but it means that the ultimate entities making the decisions are often anonymous and some prefer to stay that way.

This is the single biggest reason for dissatisfaction on a CMBS loan! It's very frustrating to have an anonymous entity making decisions that impact your ability to manage your property effectively and you cannot speak to that person!

Truth #4: You will not get credit for coming out of pocket to keep the loan current.

If your property performance is suffering and you are going to need a modification, you are much better off using all available funds toward the ultimate resolution/modification rather than by keeping the loan current a little longer. The only question that is asked by the special servicer at the time of a modification request is “what are you as a borrower going to do for me if I give you this modification?” Not “what have you done to date?”

Continuing to fund shortfalls to keep your CMBS loan current does not put you in any better graces with the special servicer than a borrower who does not. In fact, the borrower with the biggest “war chest” at the time of modification will likely get the best modification. If you, as a borrower, spend all your available funds keeping the loan current and then seek a modification with no new funds available, you will most likely not be modified.

Truth #5: Approval for the change of ownership or equity interest takes time!

Nine women can't line up and have one baby in one month. And the reason this analogy holds true here is because there are up to eight different companies required to approve the transaction. Your loan could require all of these parties to approve the change of ownership or equity interest: (i) primary servicer, (ii) master servicer, (iii) special servicer, (iv) CCR, (v) up to 4 rating agencies for the pool.

The approval works like a relay race, in that an approval party in the process does not get involved until the prior approval party hands the baton off to them. Without an expeditor, the process can take 'forever' (we often hear 6 – 9 months). No matter how good an expeditor is, there is a minimum timeline to get this all done. Nine women can't have the baby in one month! The assumption approval process almost always takes 60 days to get approvals, and that is when every party is firing on all cylinders and the baton gets passed quickly in every instance!

Truth #6: All money held in reserve is the lender's, not the borrower's.

The first thing borrowers think of when they are faced with a property that is not cash flowing is the funds held in reserve by the lender. Even though the funds were placed in the reserve account by the borrower (or via cash flow during the life of the loan), the lender is entitled to keep those reserves upon an event of default and will likely not agree to release them to help resolve a cash flow problem—unless, of course, the funds were originally earmarked for this very instance (debt service reserve or seasonality reserve). When there is a default, the borrower must be prepared to offer new capital to modify the loan and the funds in reserve are virtually off the table.

Ann Hambly is founder, president and CEO of 1st Service Solutions, based in Grapevine, TX. The views expressed here are the author's own.