DBRS Morningstar Raises Midland Loan Services’ Primary Servicer Ranking and Confirms Master Servicer and Special Servicer Rankings; Changes Trend for Master Servicer Ranking to Positive

DBRS, Inc. (DBRS Morningstar) raised its commercial mortgage primary servicer ranking to MOR CS1 from MOR CS2 and confirmed its MOR CS2 commercial mortgage master servicer ranking and MOR CS1 commercial mortgage special servicer ranking for Midland Loan Services, a division of PNC Bank, N.A. (Midland or the Company). DBRS Morningstar also changed the trend for the master servicer ranking to Positive from Stable and changed the trend for the primary servicer ranking to Stable from Positive. The trend for the special servicer ranking remains Stable.

Midland is one of the largest-volume commercial mortgage servicers and manages a diverse, complex portfolio. The Company has a highly experienced management team, solid professional depth, and thorough asset administration. The raised primary servicer ranking recognizes the Company’s strong and continually improving technology, easing workload ratios, lower employee turnover, and comprehensive audit regimen that has yielded improved audit results over the past two years. Midland’s revamped operating structure, implemented in early 2022, also is working well to promote operating synergies, facilitate managerial oversight, and cultivate career development.

As a master servicer, Midland has sound practices for advancing and determining recoverability and is proficient with the reporting requirements for commercial mortgage-backed securities (CMBS). It also has proactive subservicer oversight, including a robust audit program. The Positive ranking trend principally reflects Midland’s efforts and progress to increase its investor reporting and remitting accuracy, which DBRS Morningstar will continue to monitor. The Company’s recently activated subservicer remittance tracking tool should help as well.

Midland should continue to serve as a highly effective special servicer for CMBS and other third-party assignments based on its leadership team, asset managers’ experience, asset recovery record, procedural controls, and technology capabilities.

As of June 30, 2023, Midland’s total servicing portfolio contained 21,691 loans with an aggregate unpaid principal balance (UPB) of $569.36 billion. It was a CMBS primary and/or master servicer on 573 transactions containing 8,432 loans with an aggregate UPB of $175.56 billion. The Company’s master and primary servicing included 1,160 single-family rental loans (233,931 properties) with an aggregate UPB of $49.97 billion, including 86 securitizations with a UPB of $47.35 billion and 1,113 loans. Midland also serviced nine collateralized loan obligation (CLO) transactions and one collateralized debt obligation (CDO) collectively containing 181 loans with an aggregate $5.91 billion UPB.

As of June 30, 2023, Midland was a named special servicer on 435 transactions that collectively contained 4,532 loans with a UPB of approximately $184.54 billion, down from 532 transactions containing 6,649 loans with an aggregate $222.88 billion UPB as of YE2022. The decrease was mainly because a CMBS controlling classholder elected to transfer special servicing rights for all its investment positions to its affiliate. At midyear 2023, Midland had 183 specially serviced assets (173 in securitizations) consisting of 178 loans and five REO assets with a combined UPB of $6.92 billion.

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 (August 23, 2023; https://www.dbrsmorningstar.com/research/419592).

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

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