Home
/ Insights
/ Service Sheets
/ Real Estate Solutions: Lender and Special Servicer Advisory

Real Estate: Lender and Special Servicer Advisory

Lenders and Special Servicers face multiple challenges, including changing market conditions, investigatory and forensic issues, borrower liquidity constraints and bankruptcies, disputes related to servicing agreements, “tranche warfare” and a host of other issues associated with commercial and residential mortgage-backed securities.

FTI Consulting’s highly experienced professionals are experts at addressing these matters. We provide a broad spectrum of services that can help special servicers identify and pursue strategies to maximize recovery in particularly complex or adversarial cases. Our reputation for technical excellence, in-depth analytics, practical objectivity and negotiating expertise are all critically important to our clients’ success.

A Sampling of Our Services

Litigation Support and Expert Witness Testimony
Forensic Analyses and Investigations; Cash and Lockbox Reconciliations
Workout Strategy and Negotiations; §363 Asset Sales
Restructuring of Commercial and Residential Mortgage Entities
Bankruptcy Interest Rates and Plan Feasibility Testimony
Disputed Valuations, Fairness Opinions and Deficiency Claims
Challenges to Special Servicing Standards; “Tranche Warfare”
Receiverships and Interim Management; REO Asset Management

Capabilities

Dispute & Litigation Advisory
We assist with every phase of the dispute resolution process, starting from early case assessment, pre-litigation strategy and discovery to mediation consulting, expert testimony and trial. FTI Consulting helps special servicers resolve a range of CMBS counterparty disputes, including breach of reps and warranties, deficiency claims, putback litigation, and other complex matters.

Restructuring & Bankruptcy Advisory
Clients seek our expert help with liquidity assessment and cash flow analysis; bankruptcy plan negotiation; feasibility and interest rate analysis; negotiation of sales procedures and oversight of §363 asset sales; and buy/sell side services related to REO and distressed debt. Our expert testimony has supported servicers on Till rates of interest, plan feasibility, and the litany of issues that arise in bankruptcy.

Forensic Accounting Analyses & Investigations
FTI Consulting provides specialized services to address a range of challenges, including embezzlement and misappropriation, regulatory inquiries and fraud claims. Under duress, borrowers frequently skirt cash management and lockbox provisions of loans, giving rise to guarantor recourse obligations. Our Real Estate forensics team is adept at sifting through files and documents to identify key issues.

Lender Liability & Special Servicer PSA Compliance
Special servicers often face a variety of lender allegations: mismanagement, negligence, and breach of PSA. FTI Consulting’s support has been integral to some of the more complex special servicer disputes, such as an alleged breach of a PSA, putback litigation, FMV purchase disputes, aggrieved bondholders and other high profile, complex matters.

Receivership and Interim & Asset Management
FTI Consulting provides aid to lenders during the process of receivership and REO, offering key insights into risk mitigation, legal compliance, stakeholder communication, and value preservation. We frequently serve as receiver – or support receivers – in more complex situations, including fraud, issues of disputed title and land use issues, high-value properties, or those under construction (involving our Construction Solutions practice).

Landmark Cases: Client Selected Success Stories

Dispute & Litigation
The iconic Peter Cooper Village/Stuyvesant Town, a massive, 11,250-unit residential project, was sold by the CMBS Trust that gained title to it in a much-publicized foreclosure. Certain certificate-holders disputed the distribution of $600 million of default interest paid to the special servicer. We prepared an expert report and provided trial testimony in support of the servicer, which was critical to the district court’s ruling in favor of our client.

Restructuring & Bankruptcy
FTI Consulting was retained by the special servicer of $1 billion CMBS debt following the owner’s bankruptcy filing. Our experts advised the client during negotiations of the cash collateral order and DIP loan sizing. We analyzed financial/operational performance and cash flows, evaluated debtors’ projections and budgets, and advised on reorganization and asset sale efforts. The debt was repaid in full, with post-petition interest.

Bankruptcy Testimony re: Default Interest
Professionals at FTI Consulting prepared an expert report regarding the economic rationale and reasonableness of the lender’s claim for default interest. The bankruptcy court ruled in favor of the lender and issued a written opinion with frequent references to FTI Consulting’s expert report – this set a precedent used in other cases.

Alleged Breach of the CMBS Pooling & Servicing Agreement
A team at FTI Consulting was retained by the special servicer of the $3 billion CMBS loan, associated with the Atlantis Casino Hotel in the Bahamas, to provide analytics and dispute advisory services in connection with the proposed loan modifications that were subsequently challenged by certain certificate holders.

Forensics & Lockbox Compliance
When Innkeepers USA filed Chapter 11, FTI Consulting was retained by the special servicer to conduct forensic analysis; seek recovery of diverted cash collateral; provide expert testimony leading to a defeat of debtors’ initial restructuring proposal; perform valuation analyses; review financing, sale and bankruptcy plans; and analyze hotel performance and liquidity, working collaboratively to maximize recovery to the Trust from the ultimate §363 sale.

Disputed Valuation
FTI Consulting was retained by the secured lender to rebut a $100 million appraisal on 75 developable acres in Albany, NY, as the basis of a deficiency claim. FTI Consulting’s valuation of $2.55 million – a $97 million reduction – was accepted by the court, noting the “defendants failed to adequately rebut FTI Consulting’s opinions and conclusions.”

Receivership
FTI Consulting was appointed as the receiver of a Utah resort club upon allegations of diversion of rents and commingling of funds. We stabilized club operations, reduced costs, created a restructured and healthy membership program, funded stalled construction and facilitated a successful negotiation between members and lenders, allowing for an estimated 100% recovery for lenders.