DBRS Releases Updated Methodology for Commercial Mortgage Servicer Evaluations

DBRS has today released its updated methodology for evaluating servicers in commercial mortgage-backed securities (CMBS) transactions. The existing methodology was reviewed and publication of this methodology is part of DBRS’s continued effort to provide market participants with insights into the rationale behind DBRS’s operational risk reviews. This approach was developed based on DBRS’s global methodology “DBRS Structured Finance Servicer Evaluations,” published in July 2010, and replaces the methodology published in January 2009.

When rating a CMBS transaction, the capacity of the servicer is a key analytical consideration because servicing quality affects the performance of the trust assets from a delinquency, default and recovery perspective and, consequently, affects the ultimate repayment of rated securities. Because of the importance of the servicing role, DBRS performs regular on-site servicer reviews to gain full understanding of the company’s operational capabilities from a servicing perspective.

DBRS performs evaluations of companies that service loans in CMBS transactions it rates. The results of the evaluations (Superior, Good, Adequate or Weak) are used internally in DBRS’s initial rating of a CMBS transaction as well as in its ongoing surveillance. Commercial mortgage servicers can engage DBRS to perform a public servicer evaluation. In these instances, the results of the evaluations are announced via a press release, and a servicer evaluation report is provided to the servicer and published on the DBRS website.