Fitch Ratings: Lack of new CMBS leads to limited master servicers
The number of loans in commercial mortgage-backed securities handled by master servicers and rated by Fitch Ratings rose by 5.2% in 2010, although the total amount of the loans fell by 1.2% to $1.51 trillion. Analysts at the ratings agency said five firms service 96.8% of the unpaid principal balance of the total loans outstanding: Wells Fargo (WFC), Berkadia Commercial Mortgage, PNC Financial Services Group Inc.'s (PNC) Midland Loan Services, Bank of America Merrill Lynch (BAC) and KeyCorp's (KEY) KeyBank Real Estate Capital unit. "The concentration of master servicing duties among a few companies has been a trend over the past several years due to significant barriers to entry, lack of new CMBS issuance, and Wells Fargo's integration of the Wachovia Securities platform," Fitch said. Also there has been significant run-off in the number of loans within CMBS being serviced. Fitch said master servicers handled nearly 65,800 loans in 2010, down 21.8% from more than 84,000 at the end of 2007. Primary servicers processed about 156,900 loans as of Dec. 31, down 24.3% from nearly 207,200 loans three years earlier, according to Fitch. The 35 special servicers rated by Fitch worked on almost 4,600 loans and 957 REO assets last year worth $90.7 billion, up nearly 23% from a year earlier. A mortgage is often transferred to a special servicer, usually at the request of a master servicer, once it becomes seriously delinquent. The special servicer then tries to work with the borrower to make the loan current. Excluding REO assets, the value of specially serviced loans rose 15% to $80.6 billion from $69.9 billion at the end of 2009. Meanwhile, the value of specially serviced REO assets more than doubled to $10.1 billion at Dec. 31, up from $4 billion the year before, according to Fitch. In November, Fitch announced plans to add a new performing loan stress test to others tests it runs before assigning a rating to a fixed-rate CMBS transaction. Analysts said then the agency will look closer at property valuations and loss-coverage multiples. Write to Jason Philyaw.