CMBS forbearance: time to refinance or sell, and its price

A forbearance is the servicer’s written promise not to enforce its remedies for a set period while you refinance, sell or cure, usually for conditions and concessions. In BANK5 2025-5YR14 the master servicer can forbear up to 120 days past maturity on a signed refinance or sale. Since September 2023, trusts report forbearance to the SEC under its own code.

The rules here come from the pooling and servicing agreement (PSA) of BANK5 2025-5YR14, this site’s reference deal, federal tax regulations and SEC reporting rules. Your trust’s agreement and your loan documents govern. This is not legal advice.

Two kinds of CMBS forbearance

The maturity bridge. The master servicer may, without the controlling bondholder, “grant any extension or enter into any forbearance” for the anticipated refinancing or sale of the property after maturity, if it does not run past 120 days after maturity and you delivered, on or before the maturity date, documentation reasonably satisfactory to the servicer providing for the refinance or sale within 120 days (PSA 3.18(m)(ix)). Close inside that window and, in this agreement, no liquidation or workout fee is due on the balloon. See missed maturity.

The workout forbearance. Anything else, a pause on enforcement while you market the property, a temporary cut in payments, a standstill during negotiations, is agreed with the special servicer. A change to “the timing of payments” is a Major Decision the Directing Certificateholder can block within 10 business days while it holds control (PSA 6.08(a)(ii)). And no forbearance may extend the maturity past five years before the trust’s rated final distribution date, which in this deal means no later than April 2053 (PSA 3.18(a), (b)).

Why servicers can agree to forbear: the tax rule

A CMBS trust is a REMIC and must avoid “significant modifications” of its loans (26 CFR 1.860G-2(b)). Forbearance has its own rule in the general debt-modification regulations: an agreement by the holder “to stay collection or temporarily waive an acceleration clause or similar default right”, with no agreement to alter other terms, is not a modification at all until it remains in effect for more than two years after the borrower’s initial failure to perform, plus any additional period of good-faith negotiations or bankruptcy (26 CFR 1.1001-3(c)(4)(ii)). A forbearance that also changes terms is tested as a modification, and for a loan in default or facing a reasonably foreseeable default, the REMIC default exception generally covers it (26 CFR 1.860G-2(b)(3)(i)).

How forbearance shows up in the SEC data

Every CMBS trust files loan-level data with the SEC each month under Schedule AL (17 CFR 229.1125). The modification code field (Item 2(k)(2)) lists the kinds of modification a servicer can report. The SEC added code 10, Forbearance, to that list in the EDGAR Release 23.3 update to the asset-level schema dated September 18, 2023 (EDGAR technical specifications, ABS version 3.1). The other codes are maturity date extension, amortization change, principal write-off, temporary rate reduction, capitalization of interest, capitalization of taxes, combination and other. Anyone reading the trust’s filings can see it; cmbs.news reads the same filings loan by loan.

What a forbearance agreement usually asks of you

The PSA sets limits; the agreement sets the terms. Servicers commonly ask for:

• an acknowledgment of the default and of the amount owed;
• a waiver or release of claims and defenses against the lender and servicer;
• milestones: a listing agreement, a signed purchase contract or a refinance commitment by set dates;
• cash management, reserves, or payment of default interest, fees and servicer costs;
• sometimes consent to a receiver, or a deed held in escrow, if the milestones are missed.

Those last provisions and the release can matter more than the time you buy. A forbearance agreement is a legal document with consequences for you and your guarantor: have a real estate lawyer negotiate it.

What it costs

The PSA does not set a forbearance fee; any fee is set in your agreement. On a specially serviced loan, fees for modifications, waivers and extensions go to the special servicer (PSA 3.11(c)), the special servicing fee keeps running at 0.25% a year with a $3,500 monthly minimum, and default interest and late charges that are collected first cover advances and the trust’s costs (PSA 3.11(d)). See the fee calculator.

Making the time count

A forbearance is only worth its terms if the exit at the end is real. If it is a refinance, start it now: get a CMBS quote for a takeout. If the new loan will not reach the balance, Janover Capital LLC can talk through rescue capital, a recapitalization or a sale on the troubled loan desk. It is not your servicer or lender, and contacting it notifies no one. Related: extensions, discounted payoffs, loan default.

Sources: BANK5 2025-5YR14 PSA, dated as of April 1, 2025, sections 3.11, 3.18(a), (b) and (m), 6.08(a); 26 CFR 1.1001-3(c)(4)(ii) and 1.860G-2(b) (eCFR, current text); 17 CFR 229.1125, Item 2(k)(2); SEC EDGAR ABS technical specification, version 3.1 (September 18, 2023).