DB is out today with a piece titled "We'll take 1% of that - Thank you" that puts the spotlight on the 1% workout fees that Special Servicer's get. The theme is that the fee is too high in some cases and they use an example where a loan was worked out in just a few months and had a minimal loss, but the fee was still charged as an example. Specials are definitely doing some things poorly, and in one case that I'm very close to, definitely did not act appropriately.
I am not as well versed in the Special Servicing world as I would like to be, but this reeks of the pot calling the kettle black and also is a pretty unfair point to make. I'm open to feedback here, but the Special is charging a fee that everyone knows about and they are contractually obligated to charge - why shouldn't they get it? If the workout went fast and resulted in minimal losses, let's double the fee to that Special Servicer because they are doing a great job!
Even though I am a former sell side guy, the audacity of a sell-side research analyst to come out and say that the SPECIAL is getting paid too much is almost too much to bear. We should count the ways that the sell-side takes their pound of flesh out of a deal, and in a much more opaque manner. I'm sure the Special Servicers of our little CMBS Universe are a little perplexed when reading this piece and wondering exactly how much they lost in their B-Piece portfolio on DB deals from '07.
Finally, people who run large organizations know you don't get a profit on every deal. If you can get a home run on one deal, it gives you leverage to salvage a later less profitable deal.
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4 comments:
Exactly spot on. How much of DB's issuance profit are they giving back to the Trusts to cover losses....
this isn't cmbs research, but rather someone trying to make his point after he's already been told he's wrong. If a loan can't get paid off by its balloon date and gets transferred then pays off a few months later, it is because the special knew where to find takeout refinancing whereas the borrower did not. A 1% fee is well-deserved in addition to being contractual. You can take the guy out of S&P but you'll never take the S&P out of the guy.
I wish there was a like button next to comments ;)
gee, thanks. In case you were not at the CREFC conference this goober said that LNR was doing modifications which they generally do not do and was called out on it. I want his job.
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