Hotel & Motel Management - February 4, 2008 - (Page 14)

14 On Finance IN THE details Securitized mortgage tips Liability protection needed Must have loan modiﬁcations CMBS loans can be difﬁcult H&MM February 4, 2008 | HotelMotel.com www.HotelMotel.com/digital_edition Agreement eases debt-restructuring process recent agreement brokered by Treasury Secretary Henry Paulson helped begin clarifying collateralized residential mortgage agreements. One of the central problems addressed was how to protect mortgage-servicing agents from liability if they make changes to mortgage documents without ﬁrst getting ap- A By Jeff Wilder H&MM Columnist proval from all affected loan owners for whom they are acting as a ﬁduciary. Since this issue also affects commercial mortgage-backed securities, and many hoteliers take out debt from that source, I want to shine a spotlight on it. In late 2007, Paulson helped broker an agreement that aimed to reduce unnecessary housing foreclosures by holders of securitized debt. The agreement centered on protecting loan-servicing agents from liability if they agreed to mortgage-loan modiﬁcations on behalf of creditors, which is one of the most unrecognized impediments to decision-making ﬂexibility. When a loan originator underwrites a mortgage investment then places it in a loan pool for securitization and funding, a mortgage servicer is hired to collect and disburse mortgage payments over the years to the various owners of the pooled debt. In commercial property mortgages, they collect and disburse replacement reserve funds, review ﬁnancial statements and take care of other tasks. The mortgage servicer is the borrower’s only point of contact with the lender(s), so all interaction is handled through that agent. But this ﬁduciary has little legal leeway in permitting any modiﬁcation to the mortgage document during the life of the loan. In their view, it’s better to not do anything than come up with a “businessperson’s solution” to a condition that may require a loan modiﬁcation. Since the subprime mortgage crisis cries out for realistic debt-modiﬁcation agreements, the mortgage servicers needed all the “belt and suspenders” legal protection available to them. At its core, Paulson’s brokered agreement provided that shield. I am convinced to not do another CMBS loan after one about 10 years ago. About four years into our mortgage, I elected to take advantage of one of the clauses I’d negotiated with the loan originator, namely one permitting release of the mortgage’s lien on a vacant portion of the property so I could sell it to a third party. Despite clear verbiage in the mortgage document, it cost me close to $100,000 in legal fees (both mine and theirs) to ﬁnally gain consent, and I lost the purchaser. I was frustrated, but I came to understand that a major negative is that the servicing agent’s position is fraught with legal risk. And, as any one loan can have its pieces owned by multiple parties, the undeniable impulse is never to do anything that could invite criticism or litigation. hmm@questex.com Jeff Wilder is president of Wilder Ventures LLP, a New York Citybased asset management company, and an adjunct professor at New York University. E-mail him at jswilder1@aol.com. CIRCLE NO. 135 http://www.HotelMotel.com http://www.HotelMotel.com/digital_edition

Table of Contents Feed for the Digital Edition of Hotel & Motel Management - February 4, 2008

Hotel & Motel Management - February 4, 2008 Contents Murray, Keltner to Keynote Atlanta Event ABVI Approves Per-room Fee Hike Growth, Guest Loyalty on Lexington’s Plate Perspective Legally Speaking AAHOA Update Marketing Matters Consultant’s Corner On Finance Training Trends HotelWorld Update Trends & Stats Outdoor Furniture Limited-service-hotel-chain Report Energy-management System Provides Link to Savings Upgraded Bedding Program Cost Comes Due Less Hot Water Equals Less-costly Bills Events Learn to Take Advantage of Lower Insurance Costs Brokers Will Remain Unscathed in 2008 Transactions Ad/Edit Index Marketplace Classifieds Checking Out

Hotel & Motel Management - February 4, 2008

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