Fitch Affirms FirstCity's Commercial Mortgage Special Servicer Rating
The affirmation of the rating reflects FCSC's long company history and workout experience, particularly with small balance non- and sub-performing loans, proprietary technology, as well as experienced and tenured asset managers. The rating also reflects the new senior management team and transitional control environment, both of which are evolving after the company's acquisition in 2013 by Varde Partners (Varde).
FCSC began servicing in 1986 for investors that acquired FDIC assets and expanded to distressed commercial assets in the 1990's for investors in Resolution Trust Corporation portfolios. After the company's acquisition by Varde, it now operates as a captive servicer and asset manager with 97% of the serviced portfolio investments owned or co-invested in by Varde and other Varde/FirstCity Financial Corporation (FCFC) related assets. The remaining 3% of the portfolio are legacy FCFC co-investments with other institutional investors.
At March 31, 2015, FCSC was named special servicer for two securitized NPL transaction, VFC 2014-2and VFC 2015-3, which was sponsored by its parent Varde/FCFC. At the same date, 1,339 loans remained in the two pools, of which 1,126 loans with a UPB of \\$626.1 million were being worked out and an additional 213 REO properties with a UPB of \\$139.2 million were being managed. The portion of the assets being serviced by FCSC in the securitized structure accounted for approximately 65% of the overall portfolio. The company was also special servicing 394 non-securitized loans with a UPB of \\$280.9 million, inclusive of 19 REO assets with a balance of \\$8.1 million.
The servicer rating is based on the methodology described in Fitch's reports 'Rating Criteria for U.S. Commercial Mortgage Servicers' dated Feb. 14, 2014, and 'Rating Criteria for Structured Finance Servicers' dated Jan. 30, 2014, available on Fitch's web site www.fitchratings.com.
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