Carl Icahn goes to war against Rialto, CMBS servicers
Bombshell lawsuit: Dying mall was propped up to generate millions in fees
One outside observer, Shlomo Chopp, an adviser on distressed commercial real estate deals, said the lawsuit could have large implications for CMBS borrowers, not just investors.
“Borrowers should thank Icahn, as this case will be quoted in many foreclosure cases and may even bring change to the industry,” said Chopp. “It brings to light issues that judges have dismissed for the past 10-plus years.”
Chopp explained that when a delinquent borrower alleges servicers of their loans are playing games to rack up fees, judges dismiss it, reasoning “you owe the money, so who cares — pay up.”
“At the same time, default interest and fees are piling up, so most borrowers either walk away or settle because the downside is too great,” he said.