Goldman Sachs Group put together a mortgage-backed bond deal in 2021. Nothing unusual about that. The money went to a group purchasing 61 multifamily properties with a total of 1,719 rent-controlled units in San Francisco. The floating-rate, interest-only, first lien mortgage loan had an initial balance of $674.8 million.

By the end of 2022, the borrowers defaulted, as Mortgage Professional America noted. The loan was sold off at a deep discount, according to Bloomberg. Then came the rest of the bad news. Special servicer Midland Loan Services told the investors of a holdback of $164 million.

Holdbacks happen on occasion in CMBS financing, but this was big. As Bloomberg noted, it exposed multiple classes that had been rated as investment grade by Kroll Bond Rating Agency to potential loss and has raised fears among some investors that servicers will make surprise decisions that affect their returns in deals.