NEW YORK--(BUSINESS WIRE)--Fitch Ratings has taken the following actions on Midland Loan Services' (Midland), a division of PNC Bank, National Association, commercial mortgage servicer ratings:
--Commercial master servicer rating affirmed at 'CMS1';
--Commercial primary servicer rating affirmed at 'CPS1';
--Commercial special servicer rating downgraded to 'CSS2+' from 'CSS1'.
The master and primary servicer ratings reflect the continued strength of Midland's commercial loan servicing operations; in particular, Fitch highlights the experience and tenure of the management and staff, modest turnover, strong internal control environment with dedicated internal compliance and audit functions, as well as its ongoing commitment to servicing technology. Fitch further notes the diversity and the robust growth of the servicing portfolio.
The downgrade of the special servicer rating is primarily driven by the aging of Midland's asset management system, which compares less favorably to other Fitch rated special servicers and is no longer consistent with the highest standards of servicing ability and for managing large volumes of defaulted loans.
The special servicer rating reflects the strong experience and tenure of
asset managers, proactive surveillance of performing loans, effective
internal controls, as well as the presence of policies and procedures to
mitigate potential conflicts of interest with third-party clients.
Midland's special servicing portfolio consists exclusively of third
party appointments as neither Midland nor its parent company purchase
controlling class positions in CMBS transactions. As a third party
servicer, Midland's special servicing portfolio changes due to control
shifts in legacy CMBS transactions as losses are incurred.
Each of the ratings incorporates Fitch's Long-Term Issuer Default Rating (IDR) for PNC Bank N.A. of 'A+'/Stable Outlook as of Oct. 23, 2015.
In addition to its core CMBS servicing portfolio of $158.7 billion as of March 31, 2016, Midland services $129.9 billion of commercial real estate loans on behalf of institutional clients, $76.2 billion of multifamily agency loans, $30.4 billion of specialty finance servicing, $42.7 billion for government agencies, and $14.8 billion of single family rental securitizations.
As of March 31, 2016, Midland's U.S. commercial mortgage loan servicing portfolio consisted of 28,535 loans totaling approximately $402.1 billion. As of the same date, Midland's U.S. CMBS primary servicing portfolio totaled $164.9 billion and non-CMBS totaled $202.8 billion for an additional 16,615 non-securitized loans. Also, as of March 31, 2016, Midland was named master servicer for 8,444 loans in 285 transactions totaling $162.1 billion and responsible for the oversight of 40 primary servicers.
Also as of March 31, 2016, Midland was named special servicer on 236 U.S. CMBS transactions totaling $133.5 billion, and was actively specially servicing 53 CMBS loans totaling $575 million and was responsible for 16 CMBS real estate owned assets totaling $227 million. CMBS represents the vast majority of Midland's named special servicing portfolio.
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 July 1, 2016, which are available on Fitch's web site www.fitchratings.com.
Additional information is available at 'www.fitchratings.com'.