In one sentence
The handling of defaulted or at-risk loans by a specialist servicer with authority to modify, foreclose, or otherwise resolve them, common in CMBS.
The longer version
In securitized structures, performing loans sit with a master servicer and troubled ones transfer to a special servicer with the authority and expertise to work them out. The transfer trigger is defined in the servicing agreement.
Special servicing is where the loan documents, the intercreditor terms, and the servicing standard all get tested at once, and where a complete file earns its keep.
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