Biggest Commercial Servicers Keep Gaining Share
The top five commercial mortgage servicers as of midyear 2007 are the same ones that were on the list as of midyear 2006. And they have further consolidated their positions with significant additions, for the most part, to their servicing volume.
Wachovia Securities was the largest commercial and multifamily mortgage servicer as of midyear, at $356.6 billion in primary and master servicing volume, the Mortgage Bankers Association reports.
According to the trade association's midyear update, the other large commercial mortgage servicers are Capmark Finance ($252.3 billion), Midland Loan Services ($245.5 billion), Wells Fargo ($153.2 billion) and KeyBank Real Estate Capital ($133.2 billion).
As of midyear 2006, Wachovia's portfolio was at $270 billion, Capmark, the servicer with the smallest gain over this period, was at $245 billion, Midland Loan Services' portfolio had reached $173 billion, Wells Fargo had a commercial mortgage servicing portfolio of $110.5 billion and KeyBank REC's portfolio was at $90.75 billion.
Stacey Berger, EVP, business development for Overland Park, Kan.-based Midland Loan Services, sees it as no accident that the same servicers continue to hold sway, and have continued to do so for a number of years. "If you dig into the portfolios, the vast majority of them are CMBS purchase servicing rights. There is a limited universe of companies that are able to commit the resources to be able to acquire servicing rights. It's a business that requires a lot of capital, expertise, technology and very efficient operations. There just aren't a lot of people that can compete in that business."
Breaking out the rankings by the largest master and primary servicers of U.S. commercial mortgage-backed securities, collateralized debt obligation and other asset-backed securities, Wachovia, Capmark, Midland, Wells Fargo and Bank of America are the largest servicers, the MBA reports.
Horsham, Pa.-based Capmark, which was GMACCM until its sale a couple of years ago, has been focusing on its core business and getting out of ancillary businesses (including its MortgageRamp and Realpoint businesses) so as to gain operating efficiencies, according to Michael Lipson, a Capmark EVP. In this process, Capmark has slipped from its spot at the head of the list.
As for new opportunities, Mr. Lipson said, "60 days ago, I would have said we're looking at a lot more CDO growth. Talk to me in 90 days. It's a little hard to understand where the market is going to settle itself out. We expect that it will come back, maybe not as strong as it was before." Capmark has been getting more information requests on CDOs after the recent market turmoil, in terms of input on the properties backing the securities.
He expects that if one part of the business slackens off, another, servicing for portfolio lenders, will pick up. Mr. Lipson also sees opportunities for growth overseas considering that European and Asian economies continue to grow. This is an avenue that Capmark has been aggressively pursuing, with a presence in Europe and in Asia (Japan, the Philippines, China and India).
Two years after Katrina, Mr. Lipson says it is "almost a nonevent for servicers" since most of the claims have been settled. "The biggest issue right now is borrowers are getting smarter about shopping for insurance, and more aggressive in negotiating and bifurcating policies, which has created problems for servicers in making sure that properties are properly insured." This calls for a lot more effort on the part of servicers.
Going by master and primary servicing volume for commercial bank and savings institution loans, Wachovia, Washington Mutual, Wells Fargo, Deutsche Bank and Key Bank rank as the top servicers.
GEMSA Loan Services, Prudential Asset Resources, Midland Loan Services, NorthMarq Capital and Holliday Fenoglio Fowler are the largest servicers for life companies.
The largest Fannie Mae/Freddie Mac servicers are Midland, Deutsche Bank Commercial Real Estate, Capmark, Wachovia and Centerline.
Also, GEMSA ranks as the top servicer for credit companies, pension funds, REITs and investment funds.
And Capmark is the top FHA and Ginnie Mae servicer, Wachovia tops for warehouse loans and Capmark leads for other investor type loans.
MBA also reports rankings of "named special servicer" - servicers that are ready to service the loan should special problems develop.
The leading named special servicers were LNR Partners Inc., CWCapital LLC, Midland Loan Services, Centerline and Capmark.
While in the past the midyear update has focused on large servicers of CMBS loans, the MBA's latest update was expanded to include all large commercial/multifamily servicers, regardless of investor group.
The trade group defines a primary servicer as generally responsible for collecting loan payments from borrowers, performing property inspections and other property-related activities.
A master servicer typically serves in a fiduciary capacity and is generally responsible for collecting cash and data from primary servicers and then providing that cash and data, through trustees, to investors.
MBA figures that combine different roles do not double-count loans for which a single servicer performs multiple roles.
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