“High-Touch” Special Servicing Moves into CRE Markets

As the number and volume of troubled residential mortgages has grown, so too has demand for aggressive loss mitigation strategies and servicing operations that can deliver customized programs to meet the needs of a growing number of distressed mortgage investors — called “high-touch” servicing, a term that arose from a HousingWire story published online in April, the market in that servicing segment has been booming as of late. Which means that as the nation’s real estate mess moves headlong into commercial real estate, it was really only a matter of time before firms in that sector began launching their own “high-touch” servicing shops for troubled CRE assets. Bala Cynwyd, Penn.-based Alternative Business Credit, LLC is one of the early entrants into this space, and said earlier this month that it had formed Alternative Loan Services to provide commercial loan servicing, loss mitigation and collection services to hedge funds, investment banks and lender clients. “We are filling a market void in the special servicing of high-touch commercial credit,” said Beverly Santilli, managing member at Alternative Business Credit. “It requires razor-sharp focus on collections and default management. We are in the midst of very difficult credit cycle for the commercial borrower and the need for intelligent loan servicing is tantamount to capital preservation.” The partners at Alternative Business Credit have collectively originated, sold, serviced and securitized approximately $7 billion of mortgages, according to a press statement. Grubb & Ellis Company (GBE), a well-known commercial real estate services provider, also said earlier this week that that it had formed a financial services asset management practice designed to provide critical services to financial institutions, special servicers and government agencies dealing with challenged real estate and mortgage assets. An increasing amount of data has suggested that CRE is wobbling, and likely to be hit hard during 2009 and into 2010. The architecture billings index, a highly-watched indicator of activity among architects and often seen as a leading indicator of construction activity, fell to a record low in October as design firms saw their billing hours shrink during the month. And a separate study by Environmental Data Resources Inc. found that the number of phase 1 site assessments — a key pre-closing activity for most CRE transactions — fell 17 percent during the third quarter. Write to Paul Jackson at paul.jackson@housingwire.com. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.