Fitch Affirms CWCapital Asset Management’s Commercial Special Servicer Rating

KEY RATING DRIVERS

The affirmation of the commercial special servicer rating reflects CWCAM’s tenured and seasoned management and asset manager teams, continued dedication to maintaining its extensive special servicing technology suite, its consistent and proficient internal control environment, central role in the parent company’s business plan and demonstrated history of resolving defaulted/non-performing loans. The rating also considers potential operational risks associated with maintaining two distinct asset management systems and the potential new audits being developed and implemented for the RealINSIGHT platform.

 

CWCapital Asset Management LLC (CWCAM, or the company) is a wholly owned subsidiary of CW Financial Services LLC (CWFS). CWCAM predominately acts as a special servicer for third-party clients (98% of all securitized special servicing assignments by transaction count) and its affiliates. Historically one of the largest active legacy securitized special servicers, CWCAM has been working out securitized and CRE loans since 1995. Since its inception, the company has resolved 4,415 securitized loans totaling $67.3 billion.

 

Relative to other large legacy securitized special servicers, CWCAM has been among the most successful in gaining third-party servicing assignments for new issue securitized and Freddie Mac K-series transactions. In 2022, CWCAM added over $33 billion in named special servicing volume across 43 transactions, compared to $61 billion in 74 transactions and $63.5 billion in 86 transactions in 2021 and 2020, respectively. All new special servicing assignments continue to originate from third parties and remain mostly Freddie Mac K-series transactions which account for 60% of transactions in the named special servicing portfolio.

 

CWCAM employs 49 special servicing employees as of Dec. 31, 2022, including 12 asset managers (down from 16 last review), supported by a strong management team. Said team includes 12 senior managers (consistent with last year) who average 32 years of industry experience and 13 years of company tenure, who are supported by 14 middle managers (down from 16 at the last review) who average 22 years of industry experience and 12 years with the company, consistent with prior reviews. CWCAM’s special servicing asset managers are structured into two teams and manage borrower requests as well as the entirety of the workout process.

 

Asset manager turnover rose to 43% from 22% in 2022, including the departure of one manager and six staff level asset managers, all of which were voluntary separations. Fitch notes that while CWCAM has experienced higher than normal asset management turnover, the residual team of 12 remains highly tenured and capable, averaging 22 years of commercial real estate experience and eight years with the servicer.

 

CWCAM currently utilizes two asset management systems, RealINSIGHT and Commercial Asset Management System (CAMS). RealINSIGHT now serves as the primary asset management system for non-legacy securitized transactions (93% of the portfolio). The servicer expects to fully sunset CAMS in the coming years as the remaining legacy transaction winds down; as a result, it has been actively transitioning asset management functions into RealINSIGHT over the past few years to ensure a seamless transition.

 

In 2022, servicer expense processing (property protection advances) including approvals, fee billing, and REO cash tracking have been migrated to RealINSIGHT from CAMS for non-legacy assets, a key technology objective noted during the last review. Unique to CWCAM, the relative ease of ongoing development of RealINSIGHT allows for rapid testing and installation of new features, sourced both internally as well as from its 40 third-party technology clients.

 

CWCAM maintains a strong and stable internal control environment predicated on robust controls built into the special servicing technology and management reviews of special servicing functions. Supplementing these, CWCAM maintains a dedicated operations and compliance group and a compliance committee monitors exception reports from this group. CWCAM’s internal audit function is outsourced to a third party that is engaged to perform quarterly internal audits for Regulation AB (Reg AB) reporting and annual reviews for CAMS compliance. Another third-party audit firm is engaged to perform quarterly property management audits and related cash management reviews for REO properties.

 

CWCAM is the in process of developing an additional RealINSIGHT audit, expected to be deployed in the next year, functioning similarly to the legacy CAMS audit which verified that loan trigger data were properly set up and are functioning in the system. Given the integral nature of RealINSIGHT to CWCAM’s operations, the demonstrated proficiency of its oversight is a key portion of the servicer’s rating profile.

 

As of Dec. 31, 2022, CWCAM was the named special servicer on 10,891 loans in 313 securitized transactions, totaling $213.6 billion, an increase of 32% by transaction count and 19% by loan count since YE 2020. Additionally, the company is named special servicer on 37 nonsecuritized loans with a UPB of $140.7 million, which are primarily assets owned by CDOs managed by CWCI, nonsecuritized Fannie Mae assets and assets owned by Fortress affiliates. The servicer resolved 73 securitized and non-securitized loan and REO assets totaling $1.5 billion in 2022, showcasing the servicer’s ongoing proficiency in asset resolution.

 

Additional information is available on www.fitchratings.com

 

PARTICIPATION STATUS

The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer’s available public disclosure.

 

APPLICABLE CRITERIA

Criteria for Rating Loan Servicers (pub. 15 Dec 2022)

Criteria for Rating North American Commercial Mortgage Servicers (pub. 15 Dec 2022)

 

ADDITIONAL DISCLOSURES

Solicitation Status

Endorsement Policy

 

ENDORSEMENT STATUS

CWCapital Asset Management LLC

 

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