Fitch Affirms Wells Fargo's U.S. Commercial Loan Servicer Ratings

NEW YORK--()--Fitch Ratings has affirmed the commercial real estate loan servicer ratings of Wells Fargo Bank, N.A. (Wells Fargo) as follows:

--U.S. primary servicer rating at 'CPS1-';

--U.S. master servicer rating at 'CMS1-';

--U.S. special servicer rating at 'CSS2'.

The affirmation of the U.S. primary and master servicer ratings reflects Wells Fargo's long history of commercial real estate servicing performed by experienced and tenured staff, active involvement in the commercial real estate market, strong information technology infrastructure, thorough policies and procedures, and multilayered internal controls functions. Following several years of continuous increases, Well Fargo's CMBS primary servicing portfolio declined as of year-end 2015 due to maturities in legacy CMBS transactions. While Wells Fargo actively obtains recent vintage CMBS transactions, current transactions are smaller and are not expected to replace scheduled loan maturities through 2018. While the number of loans declined in 2015, the balance of primary serviced loans increased by 10%.

The affirmation of the U.S. special servicer rating reflects Wells Fargo's extensive experience special servicing single-borrower and floating-rate transactions that typically include highly structured loans, with several levels of debt secured by transitional assets. While the bank has limited experience in conduit transactions, its conduit-named special servicing is growing largely through third-party appointments on Freddie Mac K-series transactions. Additionally, the affirmation considers the company's limited although experienced team of asset managers, sufficient internal control environment, and information technology to support special servicing.

Fitch noted the 44% increase by balance and 40% by number of loans in Wells Fargo's named special servicing portfolio from year-end 2013 to 2015, considerable growth for an exclusively third-party servicer, as a concern relative to the small number of dedicated special servicing employees that declined from 14 to 11 over the same period. While staffing levels are appropriate for the current level of defaults, Fitch believes additional asset management personnel would be required should defaults increase significantly or named conduit special servicing volume continues to increase. Fitch believes this concern is somewhat mitigated by the tenure and experience of primary and master servicing middle managers who possess workout experience as well as efficiencies from Wells Fargo's role as master and primary for the majority CMBS transactions it is named special servicer.

Each of the servicer ratings incorporate the financial strength of Wells Fargo Bank and its commitment to commercial real estate servicing as a core business of the company. Wells Fargo, the largest CMBS master servicer by balance, services a portfolio of legacy and recent vintage transactions. The company's commercial mortgage servicing operations are built around an off-shore platform in which key servicing functions are performed by employees located outside the United States accounting for approximately one-third of the group's more than 900 employees.

As of Dec. 31, 2015, Wells Fargo was the master servicer for 557 CMBS transactions comprised of 23,528 loans with an outstanding balance of $399.8 billion, of which Wells Fargo is primary servicer for 19,461 of the loans totaling $340.2 billion. As of the same date, the bank was actively special servicing 10 CMBS loans totaling $43.8 million and was responsible for three CMBS real estate owned assets valued at $133.09 million. Wells Fargo's named CMBS special servicing portfolio consists of 122 transactions totaling $83.8 billion at the end of 2015. The special servicing group is also working out 48 non-CMBS loans totaling $43.5 million of their 1,106 non-CMBS loan portfolio totaling $1.3 billion as of the same date.

The servicer rating is based on the methodology described in Fitch's reports 'U.S. Commercial Mortgage Servicer Rating Criteria,' dated Feb. 14, 2014, and 'Rating Criteria for Structured Finance Servicers' dated April 23, 2015, available on Fitch's web site 'www.fitchratings.com'.

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

Additional Disclosures

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1005582

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Primary Analyst
Adam Fox
Senior Director
+1-212-908-0869
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Committee Chairperson
Robert Sutherland
Senior Director
+1-312-606-2346
or
Media Relations:
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Adam Fox
Senior Director
+1-212-908-0869
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
Committee Chairperson
Robert Sutherland
Senior Director
+1-312-606-2346
or
Media Relations:
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com