There are now many $ 32 billion commercial home loans in special services, the first step in debt relief

The special service is the first step for borrowers seeking to free themselves from group mortgages backed by commercial mortgage loans (CMBS), a type of bond. Transfers to special services often take place when a default occurs, a borrower threatens to default, or one seems likely.

Just like in a bank, special managers manage debt payments, but they do so on behalf of bondholders rather than a single lender. They are also responsible for negotiating training with borrowers, sometimes offering debt relief and sometimes managing a foreclosure or bankruptcy.

Lately, however, more home loans have been transferred to special services even when borrowers meet their debts, but operate in areas severely affected by COVID-19.

This is how the $ 975 million real estate debt of the famous Fontainebleau hotel in Miami Beach reached a special service in April.

Watch: Miami Beach’s iconic Fontainebleau tops the list of American hotels facing debt problems during a pandemic

May’s administrator notes indicate that the loan is asking for leniency.

Here is a graph from Moody’s showing so far the peak of special service activity during the pandemic.

Although the CMBS market of around $ 550 billion is not the largest source of financing for commercial properties in the United States. The United States is an important country that provides an early overview of the health of commercial real estate, primarily through monthly bond reports.

A year ago, about 13.5% of the commercial real estate debt sector was US $ 3.5 trillion. United States It was financed on the CMBS market, with banks and savings banks which constitute the largest source of financing with 39%, according to the Association of Mortgage Bankers.

Like many sectors, early indications suggest that owners of the CMBS market are surprised by the consequences of the pandemic when parts of the US economy stop, a threat to their ability to handle large debt loads.

Optimism about the reopening of businesses in more American states. United States Gave US stocks United States Another week of gains before Memorial Day’s long weekend with the Dow Jones Industrial Average
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gaining 3.3% over the week, leaving it only 17% of its February 12 closing record, according to Dow Jones Market Data.

Yet the human and economic cost of the coronavirus is still counted, weeks after the epidemic closed borders and brought parts of the world to work from home.

Lily: Retail sales hit a record 16.4% in April against a backdrop of coronavirus blockages and lower spending

Commercial and hotel properties have been hit the hardest in the past two months, not only in terms of loan balances that collapsed in a special service, but also in the event of late payments, according to Moody’s data.

Late payments rose to 11.8% in May on “conduit” or multi-loan CMBS that are exposed to most types of goods, an increase of 8.6% in April and only 2.6% in March, according to Moody’s.

The office sector was one of the best performing assets during the pandemic, but that could also change, especially if more companies follow in the footsteps of Facebook Inc

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and other tech companies and give employees the option to continue working from home, long after the coronavirus threat has been brought under control.

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