Morningstar DBRS Confirms CoreVest's Commercial Mortgage Special Servicer Ranking

DBRS, Inc. (Morningstar DBRS) confirmed its MOR CS3 commercial mortgage special servicer ranking for CoreVest American Finance Lender, LLC (CoreVest or the Company), a wholly owned subsidiary and division of Redwood Trust, Inc. (Redwood). The trend for the ranking remains Stable.

CoreVest has a solid track record as an experienced asset manager and special servicer specializing in permanent and transitional (bridge) small to midsize income-producing residential loans and real estate involving single-family rental (SFR) and multifamily housing. The ranking also considers that the Company to date serves solely in an oversight and approver role as a directing certificate holder (DCH) for its rated term-loan securitizations in which it manages assets and coordinates reporting through third-party named special servicers. For CoreVest's nonsecuritized assets, the Company engages directly with borrowers in a special servicer role.

The confirmed ranking further reflects the following:

-- An experienced management team that includes the asset management division head, who joined in January 2024, and several recently hired senior asset managers. Their collective experience includes surveillance, investor reporting, and special servicing for commercial mortgage-backed securities transactions as well as managing bank portfolios of distressed commercial real estate and SFR assets.

-- A suitably designed organizational structure that has undergone some recent division-of-labor refinements to boost operating efficiency. Including resources provided by Redwood, the operation has the essential components for diligent special servicing.

-- With a combination of external hiring and internal redeployments, the Company has been refortifying its ranks and strengthening its professional depth to offset employee turnover earlier this year. Through these efforts, CoreVest also has been focused on improving the allocation of asset managers' workloads and responsibilities.

-- CoreVest's success in resolving troubled loans, with most outcomes resulting in full payoffs as well as some modifications. The Company also has effectively liquidated many real estate owned (REO) assets.

-- A solid technology platform that centers on a purchased cloud-hosted application that CoreVest has customized to fit its business needs. Should the Company plan to serve as a special servicer for a rated securitization, it recognizes that enhancements may facilitate the production of the requisite reporting. Managed by a Redwood team, the technology platform demonstrates acceptable routines for data backup and recovery testing.

--- CoreVest's proactive asset management and surveillance practices, which the Company noted it has improved along with the corresponding documented policies and procedures. Policy and procedural documentation could still be expanded in the scope of areas covered and with more detail.

-- An effective audit function consisting of annual examinations of financial controls (in accordance with the Sarbanes-Oxley Act) and other operational reviews performed by Redwood's internal audit department. The most recently issued reports were satisfactory and did not cite any exceptions involving specially serviced assets. Should CoreVest become a special servicer on a publicly rated transaction, it will undergo Regulation AB attestations as well.

As of YE2023, CoreVest was the DCH on 18 rated term-loan and three unrated transitional-loan securitizations, with a combined 1,406 loans and an aggregate unpaid principal balance (UPB) of $3.97 billion. The active special servicing portfolio contained 361 loans (on a consolidated note basis) and 25 REO assets, with a combined UPB of $922.7 million involving 1,582 collateral properties. Approximately 51% of the active assets were in securitized transactions. Approximately 44% of the active assets (based on all note positions) involved SFR and 56% involved multifamily properties (including two loans secured by mixed-use properties).

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

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://dbrs.morningstar.com/research/419592.

For more information on this industry, visit dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

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