Special Servicing

Special services relate to servicing activities undertaken to maximize partner return on subperforming and nonperforming loans. As there are many different ways an asset can go bad, there are many different resolution strategies Midwest undertakes. However, each resolution strategy is always focused on maximizing value to Midwest’s partner.

The following are the components of special servicing Midwest typically offers.

Protective Advances

Midwest notifies its partners when, in its opinion, a protective advance is advisable. Our partners advance any funds necessary to make any protective advance.   Midwest does not make protective advances from its own funds.

Owner Notification

Midwest promptly notifies its partner upon receipt of any notice indicating: an obligor is in bankruptcy; any collateral is subject to legal process; and any other information that may materially and adversely affect the value of our partner’s rights and remedies in the assets, the asset’s collateral and/or REO.

Owner Approval Requirements

To the extent a partner’s consent is required prior to taking any collection or recovery action, Midwest notifies its partner’s assigned portfolio manager to request such approval. Midwest provides a description in reasonable detail of the matters as to which such approval is requested.  Until our partner approves the request, Midwest does not proceed.

Foreclosure

Prior to commencing any enforcement or foreclosure action with respect to an asset, Midwest provides its partner a revised business plan laying out revised projected expenses expected to be incurred in such action. Upon approval, Midwest proceeds with foreclosure, keeping its partner updated as to its status through its monthly reporting and the ASR, which is updated as events warrant. If required in an applicable servicing agreement, Midwest requests approval of its bid strategy prior to any foreclosure sale. Midwest then implements the approved bid strategy, usually through outside counsel.

Bankruptcy

Midwest notifies its partner through monthly reporting which, if any, of its obligors have filed for bankruptcy protection. Midwest will generally in its discretion notify its partner sooner if the affected asset is a significant asset. Midwest coordinates its bankruptcy strategy with its partner, then implements that strategy through use of outside counsel.

Other Litigation

In the event an obligor files a counterclaim against its partner for which partner may have liability, Midwest immediately notifies its partner and coordinates an appropriate response. Midwest handles these issues through outside counsel.

REO Entities

Midwest’s partners generally use REO affiliates to hold real and personal property taken back through liquidation proceedings. Midwest has worked with both aggregate vehicles (i.e., vehicles that hold multiple pieces of REO or personalty) and single asset vehicles. Midwest coordinates transfer of applicable loan documents prior to foreclosure sale as may be necessary to prevent its partner’s asset owning entity from taking title to real or personal property. If a new REO affiliate is required or advisable, Midwest requests its partner form the vehicle well in advance of taking title.

Management of Third Party Vendors (Non-REO)

Midwest identifies and manages, on terms and conditions acceptable to its partner, attorneys, professional consultants, sales brokers, leasing brokers, receivers, engineering firms, property managers and environmental firms, as necessary to assist Midwest in performing the special services. Any such third party vendor costs are passed through to Midwest’s partner. Generally, Midwest manages the accounts payable process for its partners, up to and including issuing approved payments from an operating account on which Midwest has signature authority.

Management of Third Party Vendors (REO)

REO has special requirements. When managing a partner’s REO portfolio, Midwest handles all aspects of the listing, maintenance and sales process through use of outside vendors.  Aside from the unique nature of property maintenance and sales/leasing, the payment process is similar to that for non-REO third party vendors. That is, Midwest usually manages the entire process for its partners.