The loan defaulted at maturity in November when the borrower wasn't able to refinance, but the servicer, Wells Fargo, paid investors out of a reserve account.
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[{"id": "g66bxyy", "text": "The bank took the properties as collateral as well as reserve accounts to be used according to the terms everyone agreed to and signed off on in loan documents. Trust me, whatever they agreed to was reviewed thoroughly by extremely savvy attorneys on both sides. Happens all the time.", "replies": [], "depth": 1}, {"id": "g66ep41", "text": "There are reserve accounts setup at origination for various items: TI/LC; CapEX; Tax; Insurance; Debt Service; etc. There could also be springing reserves due to a tenant vacating or DSCR going below a certain level. I'm guessing one/multiple reserves were depleted to pay ongoing debt service obligations. Generally speaking, in CMBS you cannot simply use reserves for the sake of using reserves, as the loan documents would need to have contemplated an issue such as this or some modification would have to have occurred as a result. There was also an indication that WF advanced funds as well and they would only do that with the expectation of receiving those funds back.", "replies": [], "depth": 1}]