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McKool Smith principal Gayle Klein discussed the current commercial mortgage-backed securities (CMBS) situation with

The article notes that the current markets are faced with a series of questions: whether they create a new forbearance or if they foreclose. While some tenants are working towards forbearance or modifications, some “landlords can’t just evict tenants for nonpayment with the hope that somebody else will be able to come in,” says Gayle.

In addition, there are also concerns over the fund that was supposed to be paid to the investors. Gayle explained, “Generally, in a structured securitization, class A gets paid until they’re paid in full, and it trickles down to class B and then class C. Losses are absorbed from the bottom up usually, but not always. Then the payments go from the top to the bottom.” Eventually, litigations will resolve which investors will suffer. With the complexity of CMBS, Gayle anticipates “unanticipated ambiguities” in these trust agreements.


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