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To paraphrase former Detroit Tigers pitcher Earl Wilson, “If you think nobody cares if you’re alive, try missing a couple of mortgage payments. Everyone will come looking for you.” One would think that, given the increase in commercial-mortgage loan defaults since 2008, there should by now be an efficient and certain process through which non-performing loans can be resolved. However, workouts still are oft en drawn-out and uncertain, and oft en take far longer than expected. This is particularly true in CMBS loans. The most difficult aspects of workouts revolve not around federal tax REMIC regulations and privately negotiated pooling and servicing agreement terms. Rather, the trickiest aspect of workouts revolves around differences between the lender and borrower about current real estate value, the lender’s desire not to facilitate the borrowers’ “gaming” of the system for future value appreciation and the relative bargaining power of both sides.

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