Steve Altman

Senior Manager, SME

Walk us through your path to where you are today. How did you get here?

I spent the first half of my career as a bond analyst focusing on corporate credit, eventually rising to become a portfolio manager with Torchlight Investors, an investment firm that specialized in commercial real estate debt. During the Global Financial Crisis (GFC), I was asked to lead the special servicing platform at Torchlight, which I built and managed for about six years. From there, I moved to S&P Global, where I was the analytical leader of the commercial servicing operational risk assessment team, a position I held for about ten years. After leaving  S&P in 2024, I joined Infinitum.

How does your background and experience influence your work today?

My background gives me unique insight that is highly beneficial for new special servicing market participants. First, I understand the challenges of building and running a special servicing operation, because I've done it. Second, I understand the lens rating agencies look through when they assess the various components of the operational risk of a special servicing platform.

What do you do at Infinitum? What value does that deliver to the client?

My focus has largely been on helping new CRE loan servicers, particularly special servicers, enter the marketplace by preparing them for rating agency reviews.

We've worked with several servicers who are CRE CLO issuers and want to earn the necessary rating agency approvals that allow them to service their own CRE CLOs. We're also seeing CMBS investment firms decide to bring their special servicing needs in-house after reaching critical mass, where it now makes sense to stand up their own operation. That includes firms doing traditional conduit deals as well as those that are primarily focused on the SASB space.

In my view, those bringing special servicing in-house further demonstrates to their investor base that they're in control of the assets—and the capital—that have been entrusted to them, rather than outsourcing that work to a third party.

How do you approach an engagement with a client looking to do their own special servicing?

We start by helping our clients put pen to paper on their policies and procedures. That's almost always the first step: making sure they know what their playbook looks like, because that sets the controls around the operation. And that's really an important component that rating agencies look at—how things are controlled, how decisions are made, and so forth.

Then there's the technology behind the asset management system. How automated is it? What do they want it to do? Do they have something in place today? Ultimately, how are they going to demonstrate that they have an effective system to manage their assets?

Then there's the people side. Are you right-sized in terms of staffing? Do you have the right people in the right seats? Another factor to consider is training. The rating agencies expect your people to be continuously trained. How do you do that? How do you track it? How do you know it's effective?

Finally, once you have established your control regime, how do you know it's working? We work with clients to provide guidance on the compliance and audit functions within the platform.

What does it take to do this work well, beyond the technical side?

You need to be a straight shooter with your clients. A false start with a rating agency is hard to recover from. As the saying goes, you never get a second chance to make a first impression. We seek to provide honest, straightforward feedback in a measured way, so servicers know what a rating agency's minimum expectations are.

Where do you see the biggest pressures on the industry right now?

Like a lot of industries, we're in a very challenging labor market. Hiring and keeping the right talent is hard enough, and we're also dealing with what looks like a growing default rate, which means more product to work through. So staffing an operation is one of the biggest pressures in the CRE loan servicing space right now. Rating agencies expect you to have people who have done this before and have demonstrated the competency to resolve difficult commercial real estate problems.

Then there's the maturity wall. I don't know exactly how high the wall is, but that's probably where an awful lot of defaults will come from. Interest rates are as high as they've been in some time, so deals that penciled out at a 5% coupon can't refinance at 7% plus. Some of those loans won't get refinanced, and those properties may end up changing hands as a result.

How has the industry changed most noticeably since you started, and how are participants adapting?

There have been a number of new entrants over the years, and there are many who have been in this game for 30-plus years now. During the GFC, the bulk of special servicers—call it 75%—were captives: B-piece buyers who had their own shop. When the music stopped, there were a lot of complaints that the captive model was rife with conflicts of interest. So when deals started coming back to market around 2012, there was a big push for third-party special servicing. This was furthered by the Freddie Mac K program, because Freddie didn't allow captives to do their own servicing.

But here we are, years later, and the market is back to 75%-plus captive. That leaves fewer opportunities for third parties, and the Freddie Mac K program is pretty much gone. It becomes a real fight for third-party businesses. The firms that will survive are those with larger platforms and where special servicing folds into their broader commercial real estate debt offering.

If you could change one thing about how this industry operates, what would it be?

Well, this isn't going to be a very popular answer with a certain crowd, but I would forbid bond investors from sharing in special servicing fees. Pooling and servicing agreements state that the special servicer gets paid, but the special servicer can be hired and fired at will by the controlling B-piece holder, or controlling bondholder, and that bondholder demands a share of those servicing fees. None of this is transparent to the market. These are side agreements cut when the servicer is engaged. I don't think that's the intent of the pooling and servicing agreements, but it's a workaround the industry has tolerated for years now.

Ending fee sharing would eliminate another conflict of interest, and it would presumably allow servicers to hire better people. If you're losing half your revenue, there's only so much you can do. Maybe it doesn't matter as much for the captives, because they aren't really sharing fees (it's all under one umbrella). But third parties generally aren't excited about being in a business where their profit margins are handicapped by sharing half their revenue with the bondholder that engaged them.

What excites you about the future of Infinitum?

Special servicing tends to grow in more troubled times—and here we are. When I joined S&P in 2014, new special servicers weren't being formed. We didn't see a lot of new entrants in the 2010s; it took a few years. Growth is lumpy, and we're in a lumpy phase right now, which makes for exciting opportunities for Infinitum.

At the same time, we’re a very well-known name with the rating agencies. They see us as strategic to the industry, serving as a partner to help ensure compliance as firms grow and markets evolve.