DBRS Confirms First National Financial LP’s Primary, Master and Special Servicer Evaluations of Adequate

DBRS, Inc. (DBRS) has today confirmed the evaluation of Adequate for First National Financial LP’s (FNF or the Company; rated BBB with a Stable trend by DBRS) Primary, Master and Special Commercial Mortgage Servicing capabilities.

Formed in 1988, FNF is headquartered in Toronto. The Company originates and services commercial and residential mortgage loans, including commercial mortgage-backed securities (CMBS). Its servicing office is located in downtown Toronto, with origination offices throughout Canada. FNF’s parent company, First National Financial Corporation, is currently rated BBB (low) with a Stable trend by DBRS.

FNF’s strengths include its experienced commercial mortgage management and staff, its above-average employee training program and the financial strength of its parent. FNF’s biggest challenge relates to its ability to make decisions as a Master Servicer, particularly when dealing with sub-performing assets or unusual servicing situations. Although the Company has taken a more proactive approach to monitoring and reporting on these types of situations, there is still much room for improvement. Another challenge is the continued runoff of its CMBS portfolio. FNF management has indicated its commitment to servicing its current CMBS portfolio, but its level of participation in the CMBS market going forward is unclear. DBRS will continue to monitor FNF’s CMBS servicing performance and provide the market with additional commentary as necessary.

As at December 31, 2016, FNF’s commercial mortgage servicing portfolio consisted of 5,330 loans totaling $22.24 billion, of which 245 loans, totaling $1.72 billion, were CMBS. Also as at December 31, 2016, the Company was named Master Servicer for seven CMBS transactions and oversaw four third-party Primary Servicers. Finally, as at December 31, 2016, FNF was named Special Servicer for seven CMBS transactions and was actively specially servicing two loans with an unpaid principal balance of $8.36 million.

The servicer evaluations reflect a comprehensive review of FNF’s organizational structure, management team, asset administration, loss management, technology, staffing and training, procedures and controls and financial strength.

Notes:
All figures are in Canadian dollars unless otherwise noted

The principal methodology is North American Commercial Mortgage Servicer Evaluations (July 2016), which can be found on dbrs.com under Methodologies.

DBRS will publish a full report shortly that will provide additional analytical detail on this rating action. If you are interested in receiving this report, contact us at info@dbrs.com.