Fitch Takes Multiple Actions on Wells Fargo's Commercial Loan Servicer Ratings

NEW YORK--()--Fitch Ratings has taken the following actions on the commercial real estate loan servicer ratings of Wells Fargo Bank, N.A. and Wells Fargo Securities International Limited, (collectively Wells Fargo):

--U.S. special servicer rating upgraded to 'CSS2' from 'CSS2-'

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

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

--U.K. primary servicer rating of 'CPS2' assigned;

--U.K. special servicer rating of 'CSS3' assigned.

The upgrade of the U.S. special servicer rating reflects Wells Fargo's stable and experienced team of asset managers who have historically focused on large, highly complex loan resolutions, sufficient internal control environment, and improving information technology to support special servicing. The company is implementing a centralized asset management system which is expected to be fully functional during Q2 2015. The system, which is used by other special servicers, is expected to improve operational efficiencies, improve surveillance capabilities, and add additional operational controls around workout functions. The implementation of a centralized asset management system partially mitigates Fitch's concern of Wells Fargo's rapidly growing special servicing portfolio relative to the capacity of company's seven asset managers should loan defaults increase.

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.

The assignment of the UK primary and special servicer ratings reflects a less mature operation than the U.S. business, with a single, dedicated primary servicing resource in London leveraging off the U.S. operation for most loan administration, asset management and special servicing duties. However, the European loans are serviced using the same technology platform as in the U.S., enabling a seamless servicing process. Four shared resources in London from Wells Fargo provide expertise and support when needed.

Currently, there are no dedicated commercial mortgage special servicing staff in London, although the company is actively seeking a new asset manager with performing and non-performing commercial loan experience to support European operations. The European special servicing operation therefore relies on the expertise of the shared resources described above, while also enjoying the oversight and assistance of the U.S. based special servicing group. The workout experience of European loans and assets is also lower than rated peers. If the European special servicing portfolio grows, Fitch believes London based asset managers are of the utmost importance to the success of the operation.

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, 2014, Wells Fargo was the master servicer for 493 CMBS transactions comprised of 24,062 loans with an outstanding balance of $380.4 billion, of which Wells Fargo is primary servicer for 21,923 of the loans totaling $347.8 billion. As of the same date, the bank was actively special servicing 11 CMBS loans totaling $385.2 million and was responsible for five CMBS real estate owned assets valued at $134.9 million. Wells Fargo's named CMBS special servicing portfolio consists of 111 transactions totaling $67.2 billion at the end of 2014. The special servicing group is also working out 73 non-CMBS loans and three real estate owned assets cumulatively totaling $72.6 million of their 1,292 non-CMBS loan portfolio totaling $1.5 billion as of the same date. In Europe, Wells Fargo was servicing 16 loans across three jurisdictions (U.K., Germany and the Netherlands) totaling US$1.14 billion.

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'.

Applicable Criteria and Related Research:

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

--'Rating Criteria for Structured Finance Servicers' (April 23, 2015).

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=864375

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=985061

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Contacts

Fitch Ratings
U.S. Primary Analyst:
Adam Fox, +1-212-908-0869
Senior Director
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
U.K. Primary Analyst:
Robbie Sargent, +44 20 3530 1404
Senior Director
Fitch Ratings Limited
30 North Colonnade
London E14 5GN
or
U.S. Committee Chairperson:
Daniel Chambers, +1-212-908-0782
Managing Director
or
UK Committee Chairperson:
Adam Fox, +1-212-908-0869
Senior Director
or
Sandro Scenga, +1-212-908-0278
Media Relations, New York
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
U.S. Primary Analyst:
Adam Fox, +1-212-908-0869
Senior Director
Fitch Ratings, Inc.
33 Whitehall St.
New York, NY 10004
or
U.K. Primary Analyst:
Robbie Sargent, +44 20 3530 1404
Senior Director
Fitch Ratings Limited
30 North Colonnade
London E14 5GN
or
U.S. Committee Chairperson:
Daniel Chambers, +1-212-908-0782
Managing Director
or
UK Committee Chairperson:
Adam Fox, +1-212-908-0869
Senior Director
or
Sandro Scenga, +1-212-908-0278
Media Relations, New York
sandro.scenga@fitchratings.com