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.

SCP is the servicer for most of Regions' capital markets commercial real estate portfolio. As of September 2024, SCP completed the in-house transfer of Regions' servicing for its Fannie Mae and Freddie Mac portfolios, which had been outsourced to another servicer. The transfer was conducted over a 14-month period and more than doubled SCP's servicing portfolio by dollar balances.

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

-- SCP's demonstrated 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 has established a 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, more than 25% of the loans it services are larger loans.

-- The Company continues to add or promote experienced staff and maintains reasonable workload levels to support servicing growth.

-- A well-experienced management team and an effective operating structure that incorporates resources from Regions. Employee turnover has been low, and the Company has experienced minimal manager-level departures in primary servicing over 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, 2024, the total servicing portfolio contained 1,924 loans with an unpaid principal balance (UPB) of $12.74 billion, up from 1,852 loans and a $10.11 billion UPB a year earlier. By count, multifamily loans comprised 91% of the servicing portfolio. Approximately 68% of the portfolio, or 1,312 loans, were Freddie Mac-sponsored, including 1,229 in 110 securitized transactions. The serviced portfolio included 121 CMBS loans ($764.7 million UPB) in five transactions and 488 Fannie Mae loans ($7.12 billion UPB).

As of June 30, 2024, SCP was the named special servicer for 712 loans with a UPB of $2.77 billion covering 21 Freddie Mac small-balance securitizations, two CMBS transactions, and one loan for another third-party investor. The active special servicing portfolio had a total UPB of $328.0 million consisting of 58 loans (nine conduit CMBS, forty-eight Freddie Mac securitized, and one third-party held) and two real estate owned 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 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, 2024), https://dbrs.morningstar.com/research/438283.

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

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