Commercial Servicers Respond to Katrina.

New York -- A number of commercial servicers with properties in the areas impacted by Hurricane Katrina are in the process of assessing the challenges they face, according to Standard & Poor's.

The rating agency reports that a number of commercial mortgage-backed securities servicers they contacted are "being appropriately aggressive in their efforts to establish communication with borrowers."

The way in which insurers assess the damage, determining whether it is caused by wind or flooding, may impact the processing of policy proceeds and timeframes for payout, one servicer pointed out.

Servicers are reporting that getting to the bottom of the collateral damage is an ongoing task and will take much more time to determine. A few servicers are "contending with default situations correlated to properties with significant damage." And the process to transfer some loans to special servicing is already underway.

Michael Merriam, a director in S&P's servicer evaluations group, said, "So far, servicers tell us that the biggest challenge they anticipate will be completing property damage assessments and pursuing subsequent insurance claims.

"To date, no servicer has stressed an immediate need for additional insurance administration staff due to increased workload brought on by Hurricane Katrina." Mr. Merriam notes that not all flooded properties may have been required to maintain flood coverage.

Commercial servicers have indicated that at ...