Who will determine the timing of appraisals for purposes of calculating “appraisal reduction amounts” for CMBS collateral?
CMBS pooling and servicing agreements generally require that the special servicer obtain an appraisal within a specified period following the occurrence of a “servicing transfer event” (that is, an event that requires a problem loan to be placed in special servicing) with respect to the related loan. Under some CMBS arrangements, other interested parties (for example, the holder of a subordinate note serviced under the pooling and servicing agreement but not held by the CMBS trust fund) were permitted to obtain competing appraisals, and there existed arbitration-like mechanisms to determine the appraised value that would be used to calculate the “appraisal reduction amount”. The Terms and Conditions require that newly issued CMBS arrangements not provide for such multi-appraisal arrangements.
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