In response to the inherent complexities of CRE CDO loans, Standard & Poor's released a report last week detailing how it evaluates companies who act as servicers and special servicers in this growing market segment. The report outlines the different servicing roles for CRE CDO transactions and the rating agency's method for evaluating each of them based on their specific responsibilities.
"In light of the growing presence of CRE CDOs in the market, we have broadened the scope of our servicer evaluation to determine the operational capabilities of servicers administering CRE CDO-type loans and participating in rating CRE CDO transactions," said Michael Merriam, a director in Standard & Poor's servicer evaluations group. He added that for CRE CDOs, S&P distinguishes among the following roles: the servicer, which may be referenced as the deal's master servicer, and the special servicer, which is a role that CRE CDO's collateral manager normally assumes.
When evaluating a firm that functions as an administrator of loans within a rated CRE CDO, S&P considers the servicer's administrative and portfolio management capabilities. These include staffing depth, technology, and history with such loan types, and whether these elements correspond with the firm's role in the transaction.
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