NEW YORK, July 22, 2014 /PRNewswire/ -- Morningstar Credit
Ratings, LLC today assigned its 'MOR CS2' commercial mortgage
primary servicer and special servicer rankings for Cohen Financial
Services (DE), LLC. The assigned primary and special servicer
rankings are based on the following composite factors:
Primary Servicing:
- Highly experienced management teams and solid professional
depth: Cohen has a highly experienced management team and its
professional staff members have solid industry-related experience,
including many employees who formerly worked at highly rated
servicers.
- Excellent technology platform: Cohen has effective technology
tools for its current loan administration and portfolio management
duties. The company uses a loan servicing system for all primary
servicing functions called Enterprise!, as well as an
advanced operational reporting system called Action IQ to support
portfolio and asset management functions. In particular,
Morningstar has a favorable view of Action IQ, which has dashboard
reporting capabilities for each asset manager and serves as a
highly effective workflow management tool.
- Sound internal audit and compliance program: Cohen's internal
audit function comprises annual Uniform Single Attestation Program
(USAP) and Regulation AB attestations, Federal Deposit Insurance
Corporation (FDIC) audits, and investor audits, as well as an
internal audit/compliance review program. Recently completed audit
reports cited no material control or procedural exceptions.
- Effective training function: Cohen has an effective training
program for management and personnel that stresses industry-related
coursework in addition to career advancement. Cohen maintains an
education and training committee that oversees the training
program. Morningstar believes that Cohen's training regimen and
activities are similar to programs commonly found in large-scale
servicing organizations.
- Sound portfolio management: Cohen has sound practices to
monitor collateral performance and handle credit issues on
performing loans. The company is experienced with handling highly
structured assets and distressed portfolios, and providing
investors with customized surveillance and asset
management.
- Expanding client base and increasing diversity in asset
classes: As the result of Cohen's merger earlier this year with
Pillar Financial, LLC, an affiliated entity of Guggenheim Partners,
Cohen has expanded its client base to include
agency servicing, in addition to providing primary servicing
to life insurance companies, commercial mortgage-backed
securitizations (CMBS), private equity investors, and the FDIC.
Cohen's integration of Pillar's agency portfolios and Guggenheim's
life insurance company portfolios into its existing portfolio will
be ongoing throughout 2014. Cohen successfully integrated a portion
of Guggenheim's life insurance company portfolio in the first
quarter of 2014.
- Detailed client reporting for CMBS, agency, and other investor
classes: In Morningstar's view, Cohen is highly capable of
delivering detailed reporting for a range of institutional clients,
including private equity, Government Sponsored Enterprise, and CMBS
investors.
- Sound loan administration: Morningstar believes that Cohen has
sound practices to perform effective loan administration related to
functions such as payment processing, real estate tax and insurance
administration, and surveillance.
- Fully scalable servicing platform that effectively allocates
resources to meet client needs: Cohen is able to assign staff to
client locations for certain assignments to facilitate loan
administration and enhance communication with its clients.
Special Servicing:
- Successful asset resolution history: Cohen has successfully
resolved many challenging assets in connection with FDIC
small-balance and CMBS portfolios.
- Experienced professional team: Cohen's management team and
asset managers are well- experienced with complex asset resolutions
involving a diversity of property and investor types.
- Effective technology: Cohen uses its Action IQ asset management
workflow application, which is well-suited for handling CMBS
portfolios and integrated with the company's other
applications.
- Sound asset management practices: Cohen has sound and
controlled asset analysis practices. The company is also enhancing
its delegations of authority to include approval matrices for loan
and real estate owned (REO) liquidations. The company also plans to
utilize internal templates for initial business plans that will be
centrally accessed through the Action IQ system and updated
throughout the course of the asset resolution. In Morningstar's
view, the company will demonstrate best practices by undertaking
these measures.
- Proactive internal audit and compliance functions: Cohen's
special servicing operation undergoes annual audits and has its own
compliance function to monitor adherence to servicing agreements
and loan-level requirements. Recently completed audits indicated no
material control or procedural exceptions.
- Effective conflicts of interest management: Currently, Cohen
provides special servicing functions on behalf of named special
servicers on various CMBS transactions, and therefore is not
affiliated with any investors that are the controlling class
holders on those transactions. Cohen also provides special
servicing for Mariner Holdings, an affiliated investor that holds
first-loss positions in several non-CMBS transactions. In
Morningstar's view, Cohen has an autonomous decision-making process
and sound practices to manage any conflicts of interest.
As of March 31, 2014, Cohen's
primary servicing portfolio consisted of 2,480 loans with an unpaid
principal balance (UPB) of approximately $12.02 billion. The portfolio included 238 CMBS
loans, approximately $740.9 million
by UPB; 963 insurance company and pension fund loans, approximately
$7.8 billion by UPB; 504 investment
fund and structured finance loans, approximately $2.9 billion by UPB; and 21 agency loans,
approximately $122.0 million by UPB.
By comparison, as of Dec. 31, 2013,
Cohen's primary servicing portfolio consisted of 2,130 loans with a
UPB of approximately $7.1
billion.
As of March 31, 2014, Cohen's
total active special servicing portfolio, inclusive of CMBS and
non-CMBS, contained 957 assets consisting of 558 loans and 340 REO
properties with a combined UPB of approximately $504.0 million. The CMBS portion of the active
special servicing portfolio consisted of 74 loans and five REO
properties with a combined UPB of approximately $52.5 million. By comparison, as of Dec. 31, 2013, Cohen's total active special
servicing portfolio, inclusive of CMBS and non-CMBS, contained
1,021 assets consisting of 647 loans and 374 REO properties with a
combined UPB of approximately $472.0
million.
The forecast for both rankings is Stable. Morningstar expects
Cohen to continue serving as an effective commercial mortgage
primary and special servicer for CMBS and third-party
investors.
To access Morningstar's operational risk assessment methodology
and all published reports, please visit
https://ratingagency.morningstar.com.
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