OREANDA-NEWS. Fitch Ratings affirms the commercial real estate servicer rating for RED Mortgage Capital (RED) as follows:

--Commercial primary servicer at 'CPS2-'.

The primary servicer rating reflects RED's long history of commercial real estate (CRE) mortgage servicing experience, particularly for government sponsored entity (GSE) multifamily and healthcare properties. Also considered were the company's experienced and tenured management and staff, appropriate control environment and strong technology platform. The rating also reflects the 'A' Issuer Default Rating (IDR) of ORIX Corporation, parent of ORIX USA Corporation which owns RED's parent, RED Capital Group.

Fitch found RED to maintain robust technology, including McCracken Financial Solution's Strategy CRE servicing application supplemented with ancillary applications that automate many servicing functions and create efficiencies as the platform grows. Automated operations, such as financial statement analysis and risk ratings are subject to appropriate controls via asset manager review and analysis.

As of March 31, 2016, RED's total servicing portfolio consisted of 1,947 loans totaling $15.6 billion, all of which were multifamily or healthcare related properties. The servicing portfolio is comprised of approximately 40% Fannie Mae, 57% FHA/GNMA, 1% Freddie Mac Small Balance loans and 1% balance sheet loans. Balance sheet loans are transitional and short term in nature and expected to be eligible for traditional GSE financing once stabilized.

RED originated approximately $2.2 billion of mortgage loans in 2015 and projects origination volume of $3 billion in 2016 which should lead to servicing portfolio growth as RED has retained servicing for the majority of these loans. To date, RED has originated 66 small balance loans and projects small balance program origination volume of $240 million in 2016. RED contributed loans to its first small balance securitization transaction in 2016 and will act as sub-servicer and special servicer for the loans they contributed.

RED anticipates diversifying its servicing platform through its recent designation as an approved Freddie Mac small balance loan seller/servicer and could enter the CMBS primary servicing market in the future. In addition, RED could expand into third-party servicing independently or through its affiliation with ORIX USA.