Worst Property Debt Crash in Years Looms for Workout Specialists

Emptied out malls and hotels across the U.S. have triggered an unprecedented surge in requests for payment relief on commercial mortgage-backed securities, an early sign of a pandemic-induced real estate crisis.

Borrowers with mortgages representing almost $150 billion in CMBS, accounting for 26% of the outstanding debt, have asked about suspending payments in recent weeks, according to Fitch Ratings. Following the last financial crisis, delinquencies and foreclosures on the debt peaked at 9% in July 2011.

Special servicers -- firms assigned to handle vulnerable CMBS loans -- are bracing for the worst crash of their careers. They’re staffing up following ...