Demand Keeps Growing for International Servicing Expertise.(Brief Article)

International issuance of Commercial Mortgage-Backed Securities (CMBS) has taken off in recent years ($8.1 billion for the first half of 2001, according to the MBA) giving rise to opportunities for international servicing. However, it is not always smooth sailing and United States' servicers seeking to take advantage of these opportunities should be aware of the pitfalls as well. Participants at a panel session on "International Servicing" at the Mortgage Bankers Association's recent commercial and multifamily mortgage administration conference in Chicago touched on the commercial mortgage servicing scenario in three major markets - Canada, Europe and Japan. They cautioned that servicers should be sensitive to cultural differences, not taking a "United States of Europe" approach to the European market, for instance. Lack of technological advancement is another major stumbling block.

In Canada, the servicing industry is in the state that the U.S. industry was back in the '90s, according to John Ho, director, investment banking, Merrill Lynch. About $3 billion worth of CMBS will be outstanding in Canada by the end of this year, Mr. Ho said. While this presents an opportunity for U.S. servicers, the Canadian market has some shortcomings as well. For instance, Mr. Ho said, the market is relatively new and so are the participants, there are no Canadian master servicers and there are no sub-investment grade, or 'B' piece, investors. Also, Canadian servicers "need to invest heavily in technology to catch up with U.S. servicers." On the positive side, life may be a bit easier for servicers north of the border because the Canadian legal environment tends to be more "creditor friendly," with well-established legal remedies and practices for defaulted and distressed loans, reducing "many of the risk management concerns related to commercial real estate servicing found in other countries." In fact, ...