A/B Tranching of Commercial Real Estate – Secured Loans: An ...

The Servicing Standard Override
• Based on the securitization approach, modifications affecting
fundamental economic terms can be approved by the controlling
holder. Literally, this authority would permit the controlling holder to
consent to a workout that results in the cancellation of principal or
other material changes to the loan terms.
• If left unchecked, and if the A holder is the controlling holder, the
securitization approach would empower it to agree by the ―stroke of a
pen‖ to authorize the special servicer to cancel the principal due to
the B holder or to make other changes in terms that would adversely
affect the B holder, without any requirement for consent from the B
holder. There is no protective feature for ―Unanimous Decisions.‖
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