Fitch Downgrades GEMSA's Servicer Ratings

NEW YORK--()--Fitch Ratings has downgraded the commercial mortgage servicer ratings of GEMSA Loan Services (GEMSA) as follows;

--Master servicer rating to 'CMS2+' from 'CMS1-';

--Primary servicer rating to 'CPS1-'from 'CPS1'.

Given the continued contraction in GEMSA's CMBS master servicing portfolio and plans to discontinue CMBS master servicing after older vintage transactions are resolved, the master servicer downgrade reflects the reallocation of staff to primary servicing operations, changes in its oversight process of primary servicers and concerns for institutional focus on this line of business. While GEMSA maintains the ability and resources to perform master servicing functions, they compare less favorably to the highest standards of overall servicing ability given the lack of resources dedicated exclusively to this declining product type.

The one-notch decrease in GEMSA's primary servicer rating reflects the company's aging primary servicing system, which is the among the oldest of Fitch rated servicers, and its plans to co-develop a new primary servicing system to be implemented in 2016. While the implementation of a customized commercial loan primary servicing is a concern, Fitch noted that GEMSA has demonstrated proficiency in developing technology through the development of numerous propriety systems to perform non-cash servicing functions, also decreasing its reliance on the aging system. The company is undertaking a thoughtful and methodical approach to the development of the system, which will ultimately consolidate and or interface with ancillary systems creating greater operational efficiencies within servicing.

Both ratings reflect Fitch's assessment of GEMSA's experienced management team, its seasoned servicing and asset management staff, low employee turnover compared to other Fitch rated servicers, effective internal controls, and the company's strong use of internally developed ancillary systems. Additionally, both ratings reflect the support and financial strength of its joint venture partners, GE Capital and CBRE Capital Markets.

Fitch also considered GEMSA's relationship with GENPACT, formerly an offshore affiliate of GEMSA. Given GE's minority ownership in GENPACT, GEMSA's ability to perform contracted services in-house, control over staffing selection and compensation, integration into GEMSA's technology, the dedicated nature of GENPACT's employees to GEMSA and GE's designation of GENPACT as a trusted vendor, Fitch concluded the relationship does not warrant rating limitations.

As of June 30, 2014, GEMSA's total servicing portfolio was comprised of 5,735 loans totaling $94.9 billion, of which GEMSA was the primary servicer (with an external master) for 1,141 loans totaling $18.4 billion in 107 legacy and recent vintage CMBS transactions. At the same date, the company was named master servicer for four CMBS transactions totaling $2 billion, and overseeing four primary servicers that serviced 72 loans totaling $879.9 million.

Fitch's servicer rating methodology is described in Fitch's reports 'U.S. Commercial Mortgage Servicer Rating Criteria', dated Feb. 14, 2014 and 'Rating Criteria for Structured Finance Servicers' dated Jan. 30, 2014, which are available on Fitch's web site www.fitchratings.com.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'U.S. Commercial Mortgage Servicer Rating Criteria' (Feb. 14, 2014);

--'Rating Criteria for Structured Finance Servicers' (Jan. 30, 2014).

Applicable Criteria and Related Research:

Rating Criteria for U.S. Commercial Mortgage Servicers

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=735382

Rating Criteria for Structured Finance Servicers

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=731750

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=950575

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Contacts

Fitch Ratings
Primary Analyst
Adam Fox, +1-212-908-0869
Senior Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
James Bauer, +1-212-908-0343
Director
or
Committee Chairperson
Daniel Chambers, +1-212-908-0782
Managing Director
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Adam Fox, +1-212-908-0869
Senior Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
James Bauer, +1-212-908-0343
Director
or
Committee Chairperson
Daniel Chambers, +1-212-908-0782
Managing Director
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
sandro.scenga@fitchratings.com