Servicer Criteria Will Aid Movement
New York-To reflect current commercial real estate market conditions and their effect on mortgage servicing, Fitch Ratings here has updated its U.S. commercial mortgage-backed securities servicer rating criteria, which the company plans will result in moderate rating movement for certain servicers.
According to Fitch managing director Stephanie Petosa, with the CMBS market becoming more volatile, the firm believes that "the experience of the servicer's management and staff and their financial strength is more critical now."
The first criteria change addresses the servicer's financial rating: while a CMBS servicer rating is primarily a skills rating, financial condition of the servicing entity is important, especially during challenging economic times. Fitch plans to increase its financial weightings for both master and special servicer ratings to better reflect its significance.
The second criteria change is related to employee experience: the maturity of the CMBS market has caused Fitch to revisit its assessment of employee experience levels, particularly as it relates to senior and middle management. Fitch views servicers whose management teams have experienced full real estate cycles and plans to increase its scoring hurdles in management experience favorably.
Finally, due to the increased complexity of recent vintage CMBS servicing, Fitch plans to emphasize the servicer's participation in the CMBS market over the past few years. Several Fitch-rated servicers have not participated in the recent CMBS servicing market. Other servicers have been challenged to address loan level issues with the quality CMBS market participants have come to expect. These factors will be more formally accounted for in Fitch's future CMBS servicer ratings.
"While the methodology changes represent more of a sharpening of certain key elements rather than wholesale changes, various servicers will be both upgraded and downgraded upon the changes," Ms. Petosa added.