Fitch Affirms BLS's Commercial Special Servicer Rating
The rating reflects Fitch's assessment of BLS's experienced management team, well established internal control environment, and the company's history servicing small balance commercial loans as well as larger balance commercial mortgage workout experience. The special servicer rating also reflects a historically limited focus on commercial loans and CMBS, continued elevated turnover, limited but suitable asset management technology and controls around approvals for resolution strategies, as well as the company's financial condition.
BLS experienced elevated overall turnover of 37% (up from 19% at Fitch's last review). During July 2015, BLS closed its Chicago, IL office which supported the workout efforts of an FDIC portfolio in connection with the lease expiration. The closure of the office was a key driver in BLS's recent elevated turnover; however, retained employees continue to work remotely on the FDIC portfolio. Of the 18 employee separations in the past 12 months, seven (39%) were internal transfers allowing BLS to retain the employees and their experience within the organization. Notwithstanding recent turnover, management and asset managers have 22 and 17 years of experience, respectively.
Bayview Loan Servicing, LLC is the servicing arm of Bayview Asset Management, LLC (BAM), a manager of funds that invests in commercial and residential whole loans as well as asset-backed securities and other mortgage-related assets. BLS, established in 1999, provides residential mortgage, small balance commercial, and commercial loan special servicing. Commercial loans represent approximately 6% of BLS's total servicing portfolio, reflecting a focus historically on residential loans.
BAM anticipates future growth in the commercial mortgage portfolio to come from BAM managed fund investments (including originations) and CMBS investments. BAM continues efforts to raise opportunity funds which contain CRE components, and the company continues to invest in building out its CMBS group.
As of June 30, 2015, the company was named special servicer for 6,663 non-CMBS CRE loans totaling $1.9 billion, which continues to run-off. BLS has experience special servicing various property types, as "other" property types (defined as condos, mobile home parks, and land for commercial use) made up 47% of the actively specially serviced portfolio, followed by retail, mixed use, office, and multifamily properties which made up a further 47% of the portfolio.
The servicer rating is based on Fitch's methodology, as described in the reports highlighted at the end of the press release.
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