Morningstar DBRS Confirms Commercial Mortgage Servicer Rankings for SCP Servicing, LLC

DBRS, Inc. (Morningstar DBRS) confirmed its MOR CS2 commercial mortgage primary servicer ranking and MOR CS3 commercial mortgage special servicer ranking for SCP Servicing, LLC (SCP or the Company). The trend for both rankings remains Stable. Morningstar DBRS previously recognized SCP’s parent entity Sabal Capital Partners, LLC, which is now known as RRECM Capital Partners, LLC (RRECM Capital), as the holder of these rankings but now recognizes SCP to reflect that RRECM Capital, which became a wholly owned indirect subsidiary of Regions Bank (Regions) in December 2021, conducts all servicing as SCP.

SCP is steadily becoming the servicer for most of Region’s capital markets commercial real estate portfolio. In July 2023, Regions transferred a Fannie Mae portfolio that doubled SCP’s servicing portfolio by dollar balances. And, at YE2023, SCP became the successor subservicer for a small pool of conventional Freddie Mac loans for which Regions is the seller/servicer.

The confirmed primary servicer and special servicer rankings, respectively, reflect the following factors:

-- SCP’s multiyear record as an adept servicer for government-sponsored enterprise (GSE) multifamily loan programs and especially for Freddie Mac small-balance loan securitizations. With five transactions to date, SCP continues to build its servicing history with conduit commercial mortgage-backed security (CMBS) loan pools that include some property types other than multifamily. Although SCP’s honed niche is in the smaller-balance, multifamily sector, it also services some larger loans.

-- The Company’s ability to stay ahead of servicing growth by proactively adding staff to maintain reasonable workload levels.

-- A well-experienced management team and an effective operating structure that incorporates resources from Regions. Employee turnover has been low, and the Company has not had any manager-level departures in primary servicing for the past several years. SCP also has a sound training function.

-- Proactive and controlled asset administration as well as a solid internal audit and compliance regimen that has collectively rendered satisfactory results year over year.

-- The Company’s well-integrated technology that provides highly automated transaction processing and reporting, including an effective borrower portal. SCP has sound protocols for cloud-computing network management, data backup, and data security. The platform suitably addresses the Company’s GSE and CMBS reporting requirements as a special servicer as well.

-- SCP’s relatively modest activity and operational scale for special servicing since concluding its legacy distressed-debt transactions a few years ago. However, the Company boasts a record of successful asset resolutions, sound practices, and experienced staff.

As of June 30, 2023, the total servicing portfolio contained 1,852 loans with an unpaid principal balance (UPB) of $10.11 billion, up from 1,683 loans and a $5.03 billion UPB a year earlier. By count, multifamily loans comprised 91% of the servicing portfolio. Approximately 70% of the portfolio, or 1,290 loans, were Freddie Mac-sponsored, including 1,228 in 85 securitized transactions. The serviced portfolio included 118 CMBS loans ($709.2 million UPB) in four transactions and 435 Fannie Mae loans ($5.75 billion UPB).

As of June 30, 2023, SCP was the named special servicer for 699 loans with a UPB of $2.12 billion covering 21 Freddie Mac small-balance securitizations, two CMBS transactions, and one loan for another third-party investor. SCP was the primary servicer for all of these transactions. The active special servicing portfolio had a total UPB of $116.1 million, consisting of 13 loans (six conduit CMBS, six Freddie Mac securitized, and one third-party held) and two REO properties (one CMBS and one Freddie Mac securitized).

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

Morningstar DBRS 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.

DBRS, Inc.
140 Broadway, 43rd Floor
New York, NY 10005 USA
Tel. +1 212 806-3277