Workout modification fees typically run 50 to 200 basis points of modified principal on balance-sheet loans. CMBS modifications layer a special servicer workout fee (typically 1.0 to 2.0 percent of modified principal) on top of any modification fee, plus the borrower covers special servicer legal and consulting costs.
What drives the fee?
The depth of the modification (extension only is cheapest; rate cut, term extension, and amortization change layered together is most expensive), the fresh equity the sponsor is contributing, and the strength of the workout proposal. Sponsors who present a credible business plan and fresh capital negotiate lower fees.
How is the CMBS workout fee structured?
Codified in the pooling and servicing agreement as a percentage of modified principal, sometimes with a floor and a cap. Paid out of the loan proceeds at modification close. The borrower also pays the special servicer's reasonable legal and third-party costs incurred in the workout, which can total $100,000 to 500,000.
Sources
- Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations · Mortgage Bankers Association · 2026-Q1