KeyBank Real Estate Capital has agreed to purchase billions in commercial mortgage servicing rights from Bank of America, which will single handedly bring KeyBank’s CMBS servicing portfolio to the nation's top three.
The MSR purchase agreement includes “substantially all” of Bank of America's third-party, securitized commercial mortgage loans.
At approximately $205 billion upon completion of this transaction, KeyBank's commercial mortgage servicing portfolio is expected to be “among the top three largest named servicers of commercial/multifamily loans in the U.S.,” executives said.
The agreement includes B of A’s total CMBS servicing portfolio of approximately $110.5 billion (as of March 31) and a CMBS special servicing portfolio of about $14 billion.
The Cleveland-based commercial real estate unit of KeyCorp said it has “entered into a series of agreements” including the purchase of “certain commercial mortgage servicing rights” that will substantially increase its commercial mortgage servicing business.
Simultaneously, KeyBank has agreed to acquire from Berkadia Commercial Mortgage LLC its CMBS special servicing business.
Upon completion of the purchases form Bank of America and Berkadia, KeyBank will be named special servicer on approximately $47 billion of CMBS, and consequently become the fifth largest CMBS special servicer in the country.
These acquisitions, which are expected to transition and close in the second quarter, ensure that KeyBank “is well-positioned for growth,” said KeyBank chairman and CEO Beth Mooney.
KeyBank also has entered into a long-term subservicing agreement with Berkadia. Under the terms of this agreement Berkadia will act as primary servicer of $75 billion in
Currently, KeyBank holds the highest commercial servicer ratings from Morningstar Credit Ratings and S&P as a CMBS master, primary and special servicer. Executives said it plans to leverage its existing subservicing and special servicing partnership with Berkadia and Berkadia’s mortgage servicing platform to quickly integrate the acquired B of A portfolios.
Earlier in April KeyBank entered an arrangement with Berkadia and transferred subservicing rights of close to $40 billion in securitized commercial mortgages and in return, Berkadia transferred deposits related to FHA mortgages and services to KeyBank.
As of March 31, Berkadia acted as master, primary and special servicer managing a portfolio of more than $195.6 billion.
KeyBank expects to transition and close the transactions in the second quarter.
“This is clearly a business of scale,” executive vice president and head of servicing at Berkadia, Mark McCool told this publication. “Investment in people, processes and technology affords flexibility in managing a highly diverse platform with a myriad of requirements,” hence it is imperative to constantly review and refine processes that help maintain an effective and controlled servicing process.
“We’re always evaluating potential opportunities for growth,” says McCool, demand is definitely up. In recent years the number of clients “seeking guidance” on how to maintain the same level of mortgage servicing quality when outsourcing and "reduce the total expense footprint" continues to increase.
One of the most challenging issues for servicers and banks today “is managing expenses related to their shrinking portfolios,” he adds.“Even in an environment where a portfolio is growing, interest rate compression and servicing margins are weighing heavily on those operations and their profitability.”
