Master Servicers and CMBS Loans
Since CMBS loans are pooled together, packaged into commercial mortgage backed securities, and sold to investors, they are not generally serviced by the lender that originated the loan. Instead, conduit loans are typically serviced by a third-party servicer, referred to as a master servicer. A master servicer is responsible for servicing the 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 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.
Master Servicers vs. Primary Servicers
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.
The Challenges of Conduit Loan Servicing
Unfortunately, both master servicers and special servicers sometimes have the reputation of being somewhat difficult to work with. In part, this may be because 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.