What the special servicer earns on your loan
By Brad Beattie, Director, Capital Markets, Janover Capital LLC · Published · Updated
Three fees, set in the pooling and servicing agreement: a monthly special servicing fee while it holds the loan, a workout fee if the loan recovers, and a liquidation fee if it is paid off at a discount, sold or foreclosed. The rates below are BANK5 2025-5YR14's. Knowing them tells you what each outcome is worth to the person across the table.
Worked example
An $18,000,000 loan at 4.5% spends nine months with the special servicer. The monthly fee is the greater of 0.25% ÷ 12 × $18,000,000 = $3,750 and $3,500, so $3,750, and $33,750 over nine months. Then three outcomes:
| Outcome | Workout fee | Liquidation fee | Total to the special servicer |
|---|---|---|---|
| Recovers, then pays off 30 months later | $200,250 | $0 | $234,000 |
| Refinanced within 120 days of a missed maturity | $0 | $0 | $33,750 |
| Discounted payoff or liquidation at $18,000,000 | $0 | $180,000 | $213,750 |
The workout fee on a recovered loan includes 1% of the balloon, because the balloon is a collection of principal. That is why a refinance inside the 120-day window is the cheapest exit in this agreement: it is the only path where the special servicer takes neither the workout nor the liquidation fee.
Who pays
These fees are paid from the trust's collections on your loan, so in the first instance they come out of what bondholders receive. Whether your loan documents require you to reimburse them is a question for your loan agreement. Unpaid special servicing fees do count against you in one place: the appraisal reduction formula subtracts them from the value side. See how that works.
Where each fee comes from
The workout fee is earned on a loan that recovers: after a modification, an extension or an A/B note split. The liquidation fee is earned on a discounted payoff, a note sale, or the resale of a property taken by foreclosure or deed in lieu. The special servicing fee runs the whole time in between. For the full sequence, see what happens in special servicing and the servicer clock; to find out who holds your loan, who is my special servicer.
Questions people ask
Who pays the special servicing fee on a CMBS loan?
It is paid from the trust's collections on your loan, so in the first instance it comes out of what bondholders receive. Whether your loan documents require you to reimburse it is a question for your loan agreement. Unpaid special servicing fees also reduce the value side of the appraisal reduction formula.
When does the special servicing fee stop?
It accrues only while the loan is specially serviced. It ends when the loan returns to the master servicer as a Corrected Loan, after three consecutive on-time payments, or when the loan is paid off or liquidated.
Is there a cap on the CMBS workout fee?
Not in BANK5 2025-5YR14. The workout fee is 1% of every collection of principal and interest on a Corrected Loan for as long as it stays corrected, including the balloon, with a $25,000 minimum. Other agreements may cap it; read yours.
How can a borrower avoid the workout and liquidation fees?
In this agreement, by repaying the loan in full within 120 days of maturity when it went to special servicing only for the missed balloon or a missed payment. That refinance or payoff carries no liquidation fee and no workout fee on the balloon.
Does the special servicer earn anything else?
Yes. On a specially serviced loan it keeps all fees for modifications, waivers and extensions and all assumption application fees, and it receives the default interest and late charges that accrued while it held the loan, after they first repay interest on advances and the trust's extra costs (PSA 3.11(c) and (d)).
Want the cheapest exit?
A refinance inside the window ends the file. Janover Capital can talk through whether one is possible on your loan.