Fitch Ratings has upgraded the commercial mortgage master and primary servicer ratings of Wells Fargo Bank, N.A. to reflect, among others, the integration of the Wachovia Bank servicing platform into the bank’s system.
The rating agency upgraded Wells Fargo’s CMBS primary servicing to 'CPS1-' from 'CPS2+' and its CMBS master servicing to 'CMS1-' from CMS2.
The upgrades of the master and primary servicer rating reflect the completion of Wells Fargo's Systems Process Integration project “and subsequent operational improvements.”
Wells started combining its legacy commercial servicing portfolios and technology platforms withWachovia’s in April 2011, after the two banks operated separate servicing platforms for roughly three years after the acquisition of Wachovia in 2008, analysts note.
The completion of the SPI project has enabled Wells to adopt a single set of best practices, policies and procedures.
Fitch maintains the CMBS servicing technology upgrade resulted in operational improvements that include a more streamlined workflow with increased compliance and internal quality control metrics.
Improved indicators include lack of loan advances or significant tax penalties, “analysis collection ratios comparable to Fitch rated peers,” and a highly experienced management team.
Analysts also note that a new investor reporting web portal helped improve functionality, reporting and special servicer outreach.
Fitch affirmed the bank’s CMBS special servicer rating at 'CSS2-' to reflect “the significant experience of asset management staff working out highly structured commercial real estate loans,” using internal controls and technology deemed “sufficient for current volume of defaulted loans.”
Analysts are monitoring the bank’s ability to handle the growing volume of CMBS defaults given that its special servicing portfolio has nearly doubled.
It is up from 56 transactions totaling $22.6 billion at the end of 2010 to 69 transactions totaling $40.2 billion at the end of 2012.
The growing volume of loans for which Wells Fargo is named special servicer, analysts wrote in a recent report, “and the lack of a centralized asset management system with programmatic internal controls” increase servicing quality concerns when compared toother Fitch rated conduit special servicers.
To avoid future special servicing issues Wells “is exploring the development of a centralized
As of Dec. 31, 2012, the bank was actively special servicing 26 CMBS loans totaling $1.9 billion and was responsible for nine CMBS real estate owned assets valued at $370.1 million.
As of the same date Wells was the master servicer of 24,068 loans with an outstanding balance of $332.3 billion, of which Wells is primary servicer for 21,247 of the loans totaling $311.8 billion.
