DBRS Morningstar Raises Greystone’s Primary-Servicer Ranking to MOR CS1; Confirms MOR CS1 Special-Servicer Ranking

DBRS, Inc. (DBRS Morningstar) raised its commercial mortgage primary-servicer ranking to MOR CS1 from MOR CS2 and confirmed its MOR CS1 commercial mortgage special-servicer ranking for Greystone Servicing Company LLC (GSC or the Company). DBRS Morningstar also revised the trend for the primary-servicer ranking to Stable from Positive. The trend for the special-servicer ranking remains Stable.

DBRS Morningstar recognizes GSC’s accreditations and accomplished record as a servicer for multifamily and healthcare portfolios for government-sponsored enterprises (GSEs), Federal Housing Administration (FHA)/Ginnie Mae, and other agencies and third-party clients. Through its acquisition of C-III Asset Management LLC (C-III) in December 2019, GSC has an extensive record as an adept special servicer for commercial mortgage-backed securities (CMBS) transactions and other investors. GSC’s servicing group also has expertise working out troubled GSE and FHA loans.

The raised primary-servicer ranking further reflects:
• GSC’s well-designed organizational structure, which has product-type specialist teams, to address all servicing functions. Although GSC remains centered in the agency-sponsored multifamily/healthcare sector, the integration of C-III’s servicing team and portfolio has broadened the company’s servicing reach and capabilities to more loan and transaction types.
• GSC’s operational stability and depth based on its high employee tenure and professional experience, moderate turnover, and reasonable workload ratios. Through recruiting, promotions, and redeployments, GSC has proactively added personnel to stay ahead of portfolio growth.
• Thorough procedures, which denote expertise with lenders’ myriad reporting and compliance requirements, including their securitization programs. The company demonstrates a strong focus on attentive borrower relationship management and has diligent vendor oversight practices as well.
• GSC’s substantial technology resources and integrated suite of purchased and proprietary applications, which include a robust borrower web portal. In 2020, the company expanded the portal’s features and completed other application enhancements to advance automation and compliance management. The cloud-based platform operates with sound data-protection and backup practices.
• A comprehensive regimen of internally led audits, Regulation AB attestations, and client-led examinations. A dedicated compliance function established in 2020 coordinates these activities and conducts supplemental audits. GSC’s technology affiliate also undergoes SOC I/Type 2 examinations. All recent audit results have been satisfactory overall.
• GSC’s effective response to the influx of forbearance and other loan relief requests associated with the pandemic. It quickly implemented lenders’ procedures and automated the application process through the borrower portal.

The confirmed special-servicer ranking also recognizes:
• The company’s strong management team. Although its two senior-most executives recently departed, GSC has solid leadership and excellent professional depth. GSC asset managers’ average experience is among the highest in the industry.
• GSC’s prompt hiring of more asset managers to address sharply increased portfolio volume.
• GSC’s thorough analytics and controls, which include comprehensive asset-resolution cases, sound approval practices, independent compliance audits, real estate owned (REO) property manager audits, and in-house legal oversight.
• The company’s continuing excellent asset-resolution record, which has involved a high volume of complex and challenging assets.
• A proprietary technology suite, which solidly supports CMBS-centric special servicing. GSC also is completing application enhancements this year.

As of December 31, 2020, GSC’s total servicing portfolio contained 5,848 loans with an aggregate unpaid principal balance (UPB) of approximately $52.10 billion, up from 5,184 loans and a $42.04 billion UPB at YE2019. Approximately 95% of the portfolio by loan count was secured by multifamily-oriented assets, including healthcare, cooperative, and mobile home park properties. GSC serviced 2,074 Freddie Mac loans (93% in securitizations), 2,588 Fannie Mae loans, 826 FHA/Ginnie Mae loans, and 148 loans contained in five collateralized loan obligation (CLO) transactions and one commercial real estate (CRE) collateralized debt obligation (CDO).

As of December 31, 2020, GSC was the named special servicer on 82 CMBS transactions (mostly conduit type) and nine Freddie Mac small-balance securitizations that together consisted of 1,410 loans with an approximate $17.57 billion UPB. It also was special servicer on the CDO and three of the CLOs referenced above that together consisted of 93 loans with a $1.48 billion UPB. During 2020, GSC received 110 loans (75 in first-half 2020) for special servicing. At YE2020, the total active portfolio had 137 assets (92 loans and 45 REO) with a total UPB of $3.57 billion. By comparison, at YE2019, the active portfolio (based on C-III) had 112 assets (32 loans and 80 REO properties) with a $2.62 billion UPB.

All rankings are subject to surveillance, which could result in rankings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.

DBRS Morningstar North American commercial mortgage servicer rankings are not credit ratings. Instead, they are designed to evaluate the quality of the parties that service commercial mortgage loans. Although the servicer’s financial condition contributes to the applicable ranking, its relative importance is such that a servicer’s ranking should never be considered as a proxy of its creditworthiness.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is North American Commercial Mortgage Servicer Rankings (October 20, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.

For more information on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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