DBRS Morningstar Confirms Wells Fargo’s Commercial Mortgage Servicer Rankings

DBRS, Inc. (DBRS Morningstar) confirmed its MOR CS1 primary-servicer and master-servicer rankings and its MOR CS2 special-servicer ranking for Wells Fargo Commercial Mortgage Servicing (WFCMS or the Company). The trends for all rankings are Stable.

The confirmed primary-servicer and master-servicer rankings reflect the Company’s strong management team and professional depth as well as an organizational structure that is well designed to address a very large and complex portfolio with myriad servicing obligations. Benefiting from years of refinement, WFCMS effectively integrates domestic-based personnel with a sizable and dedicated offshore team. The rankings also acknowledge the Company’s thorough and expanded quality-assurance and audit practices, proactive portfolio management and loan administration, and comprehensive data analytics. During 2020, WFCMS’ employee turnover was moderate, especially in its offshore team, and it maintained a full training regimen. As a master servicer, WFCMS has diligent subservicer oversight and auditing practices and reporting expertise for a high volume of commercial mortgage-backed securities (CMBS) and other transaction types.

The Company has excellent technology resources using purchased and proprietary applications along with internally developed robotic processes. During the past year, it advanced its cloud-computing platform with additional and enhanced automation tools to streamline workflows and bolster controls in several areas including new-loan setup and reserve-account management. The technology suite includes an integrated, vendor-supported asset-management application for special servicing.

WFCMS has a well-experienced team and sound practices for special servicing. The confirmed special-servicer ranking recognizes the Company’s successful resolution record over the years for a moderate volume of loan workouts and liquidations, which has principally involved large-loan or single-asset CMBS transactions. To address a surge of loan transfers arising from the Coronavirus Disease (COVID-19) pandemic, WFCMS promptly redeployed experienced asset managers from loan origination, underwriting, and other business lines. As portfolio volume subsided in late 2020, some of these asset managers returned to their previous roles. In recent months, WFCMS has added other asset managers to maintain reasonable workload ratios and provide for some extra capacity.

As of December 31, 2020, WFCMS’s primary- and master-servicing portfolio contained 30,536 loans with an aggregate unpaid principal balance (UPB) of $601.82 billion. CMBS loans, covering more than 550 transactions, comprised approximately 57% of total servicing by UPB and 55% by loan count. Freddie Mac-sponsored securitizations, which were the main contributor to portfolio growth in 2020, comprised approximately 20% of total servicing by UPB and 19% by loan count. WFCMS also serviced 39 collateralized debt obligations/collateralized loan obligations (CDOs/CLOs) with a combined $14.68 billion UPB and 689 loans.

As of YE2020, WFCMS was the named special servicer on 94 CMBS transactions (containing 652 loans with a total of $47.90 billion UPB), 96 Freddie Mac K-Series securitizations (containing 2,297 loans with a total $50.39 billion UPB), and 14 CDO/CLO transactions (11 CLOs and three CDOs). WFCMS also provides special servicing for a balance-sheet portfolio. The active special-servicing portfolio contained 28 loans and no real estate owned (REO) assets with a total UPB of $3.93 billion. The securitized portion of the active portfolio contained 25 loans with a total UPB of $3.87 billion. By comparison, as of YE2019, the active portfolio contained nine loans and one REO asset with a combined UPB of $800.1 million.

All rankings are subject to surveillance, which could result in rankings being raised, lowered, 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 [email protected].

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