Fitch Cites CMBS Servicer Provisions

Pooling and servicing agreements for two recent commercial mortgage-backed securities deals rated by Fitch Ratings have incorporated explicit terms on servicer advance reimbursements.According to the agreements, any advance deemed recoverable in respect of any mortgage loan before it gets corrected, together with interest accrued, is to be reimbursed with first priority on the collection date from principal payments. If the available principal is not sufficient for full reimbursement, the reimbursement is to be deferred to the next collection period. Interest payments are not to be used for the reimbursement of the advances. Mary Metz, a Fitch managing director, said one benefit to the trust from incorporating these specific terms is that "it will save the expense of interest on the advances." Principal payments to senior certificateholders may be deferred, which could extend the life of the certificates, but this does not constitute "a negative credit event," according to Fitch.