Takeaways: MBA’s Commercial/Multifamily Finance Servicing and Technology Conference

The MBA’s Commercial/Multifamily Finance Servicing and Technology Conference is taking place this week at the Sheraton Grand Chicago Riverwalk in Chicago, Illinois. The following are Slatt Capital’s servicing team’s takeaways from the seminal commercial real estate servicing event.

• Expect enhanced surveillance – servicers will ask borrowers more questions on upcoming lease renewals, OPEX questions, and details on the granularity of the rent roll. There are lots of eyes on the financial statement reporting and they need information and stories to the why and what the borrower plan is.
• Servicer challenges include reporting higher expenses from borrowers’ OS (i.e. inflation in utilities, insurance premium, etc.) and addressing trailing deferred maintenance items during inspections in the post-COVID year.
• High maturity rates in the next two years (high percentage in office properties); maturity risks present due to higher interest rates and lower appraised values.
• Anticipate increasing office CMBS loans going to special servicers; also 6,000 Freddie small balance loans went to special servicers in the past year (huge jump).
• Insurance premiums are rising to an all-time high. Some markets are seeing premium increases of 75-100% over previous years.
• Lenders want more data and timely information – this will put pressure on servicers and require a strong servicer borrower relationship.
• Servicers are not seeing a material increase in delinquent loans.
• Due to rising premium costs, insurance agents are looking for ways to cut costs for the insured. This includes increasing deductibles and eliminating excess coverages and or endorsements. This can be problematic because often these changes make the borrower non-compliant with the lender’s requirements.
• As catastrophic natural disasters have increased, losses are outpacing historical numbers. In hurricane-prone areas, borrowers are having increased difficulty obtaining required named storm and wind insurance. In California, wildfire exclusions are becoming increasingly common.