DBRS Morningstar Confirms Berkadia’s Commercial Mortgage Servicer Rankings

DBRS, Inc. (DBRS Morningstar) confirmed its MOR CS1 commercial mortgage primary servicer ranking, MOR CS2 commercial mortgage master servicer ranking, and MOR CS3 commercial mortgage special servicer ranking for Berkadia Commercial Mortgage, LLC (Berkadia or the Company). The trend for all three rankings remains Stable.

DBRS Morningstar confirmed Berkadia’s primary servicer ranking based on the Company’s strong professional depth, effective leveraging and oversight of its well-established offshore operations, extensive internal audit regimen, diligent portfolio management practices covering a large and complex portfolio, and proactive borrower-centric loan administration. Aside from Berkadia’s lengthy and accomplished record as a servicer for commercial mortgage-backed securities (CMBS) transactions, the Company also has developed proficiency servicing single-family rental (SFR) loans and related securitizations, a business line it launched in early 2020.

Additionally, DBRS Morningstar recognizes Berkadia’s excellent technology, which the Company continues to enhance with platform security upgrades and new automation tools, including some with robotic and machine-learning components, to further elevate workflow management, portfolio surveillance and real estate market analysis, and borrower/client information exchange.

While the master servicer ranking acknowledges Berkadia’s expertise and extended, successful performance record with CMBS investor reporting and advancing, it also considers the Company’s modest portfolio activity involving CMBS loans with subservicers. However, Berkadia’s subservicer tracking and auditing procedures are sound and commensurate with its level of required oversight. Berkadia also master services a growing portfolio of correspondent lender loans for insurance company clients.

The special servicer ranking considers Berkadia’s operational scale and portfolio volume, which has remained generally modest over the past few years, even with increased work arising from the Coronavirus Disease (COVID-19) pandemic. Nonetheless, the Company maintains effective control practices and solid investor reporting capabilities, and it has been resolving loans expeditiously. The core workout team consists of a highly experienced senior vice president, who also oversees portfolio surveillance, and two other highly experienced asset managers. In addition to handling CMBS and other loan transfers, the group handles default management for government-sponsored enterprise (GSE) and balance sheet loans.

As of June 30, 2021, Berkadia’s total primary and master servicing portfolio consisted of 19,896 loans with an aggregate unpaid principal balance (UPB) of $316.15 billion. Within this total, Berkadia was the primary or primary/master-combined servicer for 721 CMBS loans; 2,232 Fannie Mae loans; and 3,030 Freddie Mac loans, including 2,601 loans contained in Freddie Mac-sponsored securitized transactions. It also was the servicer on 624 SFR loans with a total UPB of $2.63 billion, which were mostly in securitizations. The CMBS master-servicer-only portfolio contained 35 loans with a UPB of $137.0 million involving five subservicers, of which all but one serviced five or fewer loans for Berkadia. By comparison, at YE2020, Berkadia’s total servicing portfolio contained 20,295 loans with an aggregate $302.86 billion UPB. Multifamily, office, and SFR loans provided most of the volume gains this year.

As of June 30, 2021, Berkadia was the named special servicer on nine securitizations consisting of 291 loans with a UPB of $2.38 billion. The active portfolio contained 32 loans (including three loans in forbearance) with a total UPB of $366.8 million consisting primarily of GSE healthcare and multifamily loans. The CMBS component of the active portfolio contained two loans with a total UPB of $17.5 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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