With deals involving the placement of terrorism insurance facing more and more interest shortfalls and those that have accumulated advances for properties suffering from plunging real estate values, Moody's Investors Service released a report on smoothing recoveries of servicer advances to lessen interest shortfalls in CMBS.

In the cases that involved the forced placing of terrorism insurance policies by special servicers, courts have ruled that borrowers were not liable to pay the insurance premiums as well as legal fees accumulated by the servicer. The imposition of these charges, advanced by the servicer beforehand against the CMBS trust in a single month, has caused interest shortfalls that have hurt investment-grade bonds.

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