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CMBS Servicers Continue to Post Growth

Major commercial mortgage-backed securities servicers have continued to add to their portfolios in the last year, based on a midyear survey of CMBS servicers by the Mortgage Bankers Association. Only firms servicing at least $1 billion of total master, primary or special servicing for loans in CMBS issues are included in this survey.

Wachovia Securities, with a $270 billion portfolio, heads up the list, based on master and primary servicing volume for all investor groups, including U.S. and international servicing. As of midyear 2005, Wachovia's comparable portfolio was at $203 billion and the firm was second to Capmark Finance (formerly GMACCM). In the current period, Capmark is placed after Wachovia, with a $245 billion portfolio, up from about $219 billion for last year.

Other top commercial mortgage servicers, on the same basis, are Midland Loan Services ($173 billion), Wells Fargo ($110.5 billion) and KeyBank REC ($90.75 billion). Midland's comparable portfolio at the last midyear survey was $142 billion, Wells Fargo's at $57 billion and KeyBank REC's at $39 billion.

Based just on CMBS primary and master servicing volume, Wachovia heads up the list again with $187 billion, followed by Capmark Finance with $140.1 billion. Other top CMBS servicers on this basis are Midland Loan Services ($115 billion), Wells Fargo Commercial Mortgage Servicing ($78.4 billion) and KeyBank REC ($64 billion).

Considering only master servicing volume on CMBS loans, Midland Loan Services leads with about $99 billion, followed by Wells Fargo with about $76 billion, KeyBank REC with about $58 billion, Bank of America with about $48 billion, and Wachovia Securities at about $42 billion.

The MBA defines a primary servicer as one generally responsible for collecting loan payments from borrowers, performing property inspections and other property-related activities, while a master servicer typically serves in a fiduciary capacity.

Leslie Fairbanks, managing director, real estate services, Wachovia Securities, told Commercial Servicer that the firm continues to benefit from being part of a strong CMBS origination group. Also, "We have got very deep relationships with some of the other most active issuers in the industry." As well, Wachovia's acquisition of American Property Financing earlier this year has helped buttress the company's portfolio by about $8 billion. And Wachovia also has a "very active" tax credit investment business and a general bank side that they do servicing for.

Ms. Fairbanks believes that Wachovia has fallen behind on the master servicing list since they usually get both master and primary servicing assignments together, which leaves only a small number of loans on which they get only the master servicing.

Wachovia is looking to continue to grow their portfolio and is "always on the lookout for opportunities" in terms of new acquisitions. They would also like to take advantage of growth in the commercial real estate-related collateralized debt obligation arena and currently service a number of these CDO transactions. And Wachovia is also a large servicer in the area of securitized condo loans, which has been growing in the past year, according to Ms. Fairbanks. However, "It remains to be seen if that industry grows further."

Not only is the servicing volume increasing, the complexity of deals is also rising, she noted. While slicing and dicing of the transactions has been going on for a few years now, "it has now taken another turn in that they are now throwing those pieces into CDOs." This adds another servicing complexity in terms of "the timing of reporting and remittances between the CMBS deals and the CDO deals" creating an additional challenge for servicers to contend with.

Jamie Woodwell, senior director, commercial/multifamily research, with the Washington-based MBA said that the trade association's midyear survey focuses only on CMBS servicers since they demand more timely information than is presented through an annual survey. (c) 2006 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com