A master servicer is responsible for servicing a CMBS loan through its entire term, unless the borrower defaults on their mortgage. Master servicers are also responsible for managing payments and interacting with the borrower on a regular basis. In some cases, day-to-day communication for a CMBS borrower may actually be handled by another type of servicer, referred to as a primary servicer. In this case, the master servicer may have several primary servicers they work with in order to service a large pool of loans. While a primary servicer can often handle smaller requests on their own, for more significant requests, they generally need the approval of the master servicer. In the case that a CMBS borrower does default on their loan, a special servicer will usually be assigned. The special servicer will determine whether the loan can be salvaged (often via a loan modification), or if the property should be sent to foreclosure.

A master servicer is responsible for handling everyday issues related to a CMBS loan, such as collecting and receiving monthly mortgage payments and required escrows, paying insurance premiums and real estate taxes, maintaining books and records, and keeping tabs on a borrower to prevent issues that could lead to a loan default. In some scenarios, a master servicer may assign a secondary servicer, known as a primary servicer, to execute many of the everyday functions that they are responsible for. Source 1 and Source 2.

The primary benefit of having a master servicer in a CMBS loan is that they handle all of the borrower's payments and paperwork after the loan closes. They also answer any questions that a borrower has during the term of the loan. Additionally, having a master servicer allows the primary servicer to handle a larger volume of loans at once.

Sources:

• www.multifamily.loans/apartment-finance-blog/master-servicers-for-cmbs-loans-what-borrowers-need-to-know
• www.multifamily.loans/apartment-finance-blog/special-servicers-for-cmbs-loans

The main risk associated with having a master servicer in a CMBS loan is that they are legally obligated to have the CMBS investors' best interests in mind, which may not necessarily be congruous with the best interests of the borrower. In addition, servicers may be dealing with hundreds (or thousands) of borrowers, so they may not have a great deal of time and attention to devote to one individual borrower. If you default on your loan, it will typically be sent to a special servicer, who may be able to adjust the terms of your debt. This could include deferring or forgiving interest or fees, or allowing the substitution of collateral. However, the special servicer works for the investors, not the borrower, so if they believe that foreclosing on the property will increase investor profits, they will almost certainly do so. In other cases, they may assist with the loan assumption process, in which another borrower would take on the CMBS debt. In general, banks and life companies are significantly more flexible when it comes to modifying loan terms when compared to CMBS.

A master servicer is responsible for servicing the loan through its entire term, unless the borrower defaults on their mortgage. This means that the master servicer will handle a borrower’s payments and any additional paperwork that is required after the loan closes. They will also generally be responsible for answering any questions that a borrower has during the term of the loan. In the case that a CMBS borrower does default on their loan, a special servicer will usually be assigned to determine whether the loan can be salvaged (often via a loan modification), or if the property should be sent to foreclosure.

In summary, a master servicer affects the terms of a CMBS loan by managing payments, handling additional paperwork, and answering any questions that a borrower has during the term of the loan. In the case of a default, a special servicer will be assigned to determine whether the loan can be salvaged or if the property should be sent to foreclosure.

When selecting a master servicer for a CMBS loan, borrowers should consider the servicer's experience in administering conduit loans, their ability to answer questions and handle paperwork, and their flexibility in modifying loan terms in the event of a default. Unlike bank loans, borrowers will not be dealing directly with their lender after the loan has been securitized and sold to investors. Instead, they will work with a master servicer, who is responsible for collecting payments, inspecting the property, and taking care of other administrative functions. If the borrower defaults on their loan, it may be sent to a special servicer, who may be able to adjust the terms of the debt, such as deferring or forgiving interest or fees, or allowing the substitution of collateral. However, the special servicer works for the investors, not the borrower, so if they believe that foreclosing on the property will increase investor profits, they will almost certainly do so. In other cases, they may assist with the loan assumption process, in which another borrower would take on the CMBS debt. In general, banks and life companies are significantly more flexible when it comes to modifying loan terms when compared to CMBS.