With equity eroding away by day, the ongoing COVID-19 recession may cause many borrowers to simply walk away from their distressed non-recourse CMBS loans. And, no surprise to anyone at this point, the pain is being felt most by retail and lodging. Major players in real estate within CMBS conduits are in for some hard hits: Blackstone, Brookfield, Starwood, and Colony Capital are all turning their backs on struggling assets. 

Are borrowers just playing the system to walk away from their non-recourse loans? Will the CMBS separate structure loophole get closed or modified before entire portfolios get taken down in a ripple effect? And when will the market finally begin to punish those who are shedding liabilities via these loopholes, or will the chaos and damage continue to spread?