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Morningstar Credit Ratings Publishes Report on Commercial Mortgage Servicing Portfolio Trends

Morningstar Credit Ratings, LLC today published its report "Commercial Mortgage Servicing Trends—Battling CMBS Headwinds, Servicers Pursue Alternatives to Sustain Volume."

To assess commercial mortgage servicers' portfolio activity, especially in the commercial mortgage-backed securities sector, Morningstar analyzed the aggregated semiannual data it received from the four largest servicers: PNC Real Estate/Midland Loan Services, Wells Fargo Bank N.A., Berkadia Commercial Mortgage LLC, and KeyBank N.A.

As the master servicers for most CMBS transactions and collectively servicing upward of 100,000 loans, including all investor types, these companies are an excellent representation of not only the CMBS sector but also the commercial mortgage servicing industry.

Morningstar's report finds that master servicers are succeeding in their efforts to confront lower CMBS issuance and the much publicized wave of maturing CMBS loans. With shrinking CMBS loan portfolios, the servicers capitalized on the programs of government-sponsored enterprises and other lenders' output to replenish payoffs.

Although they experienced minimal growth last year, master servicers' work demands did not ease. They had an uptick in asset transfers to special servicers with matured loans, overwhelmingly from 2007-vintage transactions, representing a growing share of the transfers.

The servicers also are contending with the extensive investor-reporting and compliance-tracking requirements of newer CMBS, securitizations from the GSEs, and other third-party clients. Furthermore, they have had to address high levels of loan-boarding and a steady, albeit reduced, volume of CMBS borrower consents. As legacy transactions conclude, servicers also are administering more trust terminations.

Morningstar Credit Ratings, LLC is a nationally recognized statistical rating organization (NRSRO) offering a wide array of services including new-issue ratings and analysis, operational risk assessments, surveillance services, data, and technology solutions. Morningstar Credit Ratings, LLC is a subsidiary of Morningstar, Inc. (NASDAQ: MORN).

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individual investors, financial advisors, asset managers, retirement plan providers and sponsors, and institutional investors in the private capital markets. Morningstar provides data and research insights on a wide range of investment offerings, including managed investment products, publicly listed companies, private capital markets, and real-time global market data. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $200 billion in assets under advisement and management as of March 31, 2017. The company has operations in 27 countries. Morningstar, Inc. is not an NRSRO and does not issue NRSRO credit ratings.