Master Servicers Key in Disasters

Fitch Ratings has outlined its procedure for evaluating a natural disaster's implications for U.S. commercial mortgage-backed securities, a procedure that it says "shines the spotlight" especially on the master servicer.

After a disaster such as Hurricane Dennis, Fitch's CMBS Performance Analytics Group polls master servicers of Fitch-rated transactions to identify deals and loans that may be affected, according to Fitch director Britt Johnson.

"Typically, master servicers rely on the Federal Emergency Management Agency's website to identify affected areas and will contact borrowers and property managers directly to determine what damage those properties may have suffered and if the natural disaster may impact the borrower's ability to pay debt service in a timely manner," the Fitch analyst said.

The findings are summarized and provided to Fitch, and properties sustaining damage above a certain threshold are included on the master servicers' monthly watch list reports, the rating agency said.

"The master servicers' information helps to identify the exposure within a transaction, with special attention paid to larger loans and any concentrations of affected loans," Fitch explained.

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