Rationale

S&P Global Ratings' ranking on CBRE Loan Services Inc. (CBRELS) is STRONG as a commercial mortgage loan primary servicer. On May 18, 2022, we affirmed the ranking (please see "CBRE Loan Services Inc. STRONG Commercial Mortgage Loan Primary Servicer Ranking Affirmed; Ranking Outlook Stable," published May 18, 2022). The ranking outlook is stable.

Our ranking reflects CBRELS':

• Lengthy track record of servicing loans from multiple capital sources, various property types, and U.S. geographies;
• Experienced, qualified, and well-tenured management team and staff;
• Highly automated servicing process through an effective use of technology, including its recently upgraded borrower and investor portals;
• Solid audit and compliance environment;
• Institutional backing and financial support from its parent company, CBRE Group Inc. (NYSE: CBRE); and
• Significant use of outsourcing routine servicing tasks to an overseas third party, Genpact, under a service-level agreement.

Since our prior review (see "Servicer Evaluation: CBRE Loan Services Inc." published Sept. 14, 2020), the following changes and/or developments have occurred:

• CBRELS' primary servicing portfolio's unpaid principal balance (UPB) increased by over 33%, while the number of loans rose over 63%. The growth also reflected the migration of seven portfolios from other servicers, comprising over 4,500 loans totaling $35 billion in UPB;
• The number of staff increased by 38% to support growth in the servicing portfolio and asset management business;
• Turnover increased to over 22% in 2021 from recent lower historical levels. Management believes the spike reflected market and industry forces, including a tight labor market making it difficult to retain talent;
• CBRELS implemented Talent Coach, a new tool within a larger corporate CBRE initiative, that enhances its online training offerings while providing a performance assessment platform;
• CBRELS received Release 19F of McCracken Strategy's commercial loan servicing system. The company will begin installation and conversion package upgrades in its development environment in the second quarter of 2022, with a target go-live date in fourth-quarter 2022;
• CBRELS rebuilt its borrower portal in 2021 to provide additional layers of validation and security, and an enhanced borrower dashboard. The release is scheduled for second-quarter 2022;
• CBRELS upgraded its investor portal in 2021 to provide more customization, improve metrics and information, and utilize cloud analytics. The release is scheduled for second-quarter 2022; and
• The company has adopted a hybrid working environment and the CBRELS offices are open to all employees, but there is no requirement that employees work in the office at this time. The company is working on a plan to create a formal remote work policy to balance the need for employees to be in the office to collaborate and interact, but provide the flexibility of a work from home schedule.

The ranking outlook is stable. We believe CBRELS will continue to perform as a highly capable and effective commercial mortgage loan primary servicer of a diverse and growing portfolio. CBRELS' experienced leadership team continues to invest in personnel and technology, and it maintains the internal control environment necessary to manage a portfolio commensurate with a STRONG ranking.

In addition to conducting a virtual meeting with servicing management, our review includes current and historical Servicer Evaluation Analytical Methodology data through Dec. 31, 2021, as well as other supporting documentation provided by the company.

Profile

CBRELS is a wholly owned subsidiary of CBRE Capital Markets Inc., which in turn, is a wholly owned indirect subsidiary of CBRE Group Inc. (CBRE). According to management, CBRE is the world's largest commercial real estate services and investment firm (as measured by 2020 revenue). The company has more than 105,000 employees in 500 offices worldwide. CBRE is publicly traded on the New York Stock Exchange under the symbol CBRE and is included in the S&P 500 Index. CBRE's commercial real estate services offerings include investment management, appraisal and valuation, brokerage and property management, facilities, and project management.

As of year-end 2021, CBRELS serviced $327 billion of commercial real estate loans globally, with the vast majority (approximately $247 billion) serviced in the U.S. According to the Mortgage Bankers Assoc. (MBA), CBRELS is the fifth largest U.S. primary and master servicer by UPB as of Dec. 31, 2021. We note that the MBA survey ranks servicers by their combined primary and master servicing volumes, even though CBRELS does not perform master servicing for the securitized market. The company's U.S. servicing operations are headquartered in Houston, with additional offices in New York and Atlanta.

In the U.S., the company services commercial mortgage loans for life insurance companies, government-sponsored entities (GSEs), loans contained in a commercial real estate-collateralized loan obligation, commercial mortgage-backed securities (CMBS) loans, third-party investors, private equity firms, and banks. Additionally, the commercial mortgage intermediary and servicing platform note CBRE as a:

• Top Freddie Mac Optigo lender (second by volume in 2021 with $9.2 billion originated), Fannie Mae DUS lender (second by volume in 2021 with $6.8 billion originated), and HUD/FHA originator;
• Correspondent broker, sourcing loans for its numerous life company lender clients;
• Producer of loans for various CMBS conduits on a limited servicing retained basis;
• Roll-up servicer for certain life company strategic clients and coordinator with other correspondents providing consistent processing and reporting to those clients;
• Commercial loan asset manager related to "high-touch" transactions, including construction draw administration, condominium/lot administration, and syndication administration; and
• Commercial loan third-party due diligence, loan underwriting, and advisory services provider.

In executing its business plan, CBRELS management continues to focus efforts on the following:

• Marketing its services to the burgeoning debt fund market, private equity firms, and banks, including foreign banks with commercial mortgage loans secured by U.S. properties;
• Continued growth of its "high-touch" asset management services;
• Increasing market share as a servicer for life companies that want to consolidate numerous correspondent relationships; and
• Continued leveraging of its new third-party loan underwriting and advisory platform.

Table 1

Management And Organization

The management and organization subranking is STRONG.

Organizational structure, staff, and turnover

The CBRELS management team and staff continue to exhibit solid levels of industry experience and tenure with a significant increase in staff numbers (see table 1) in recent years. These experience and tenure levels are similar to its STRONG-ranked peers (see table 2).

An executive managing director with over 27 years of industry experience and 15 years of company tenure leads the company's U.S. operations of 210 employees (as of Dec. 31, 2021). Reporting directly to the senior managing director include:

• A senior managing director of portfolio management for the private client, life company, and institutional portfolios, with 30 years of industry experience and 26 years of company tenure;
• A senior managing director of portfolio management for the agency and CMBS portfolios, with 30 years of industry experience and 17 years of company tenure;
• A director of FHA/HUD, Multi-family (MF), and health care with 23 years of industry experience and six years of company tenure;
• A managing director of asset management, with more than 20 of years industry experience and four years of company tenure;
• A managing director of underwriting, with 27 of years industry experience and three years of company tenure;
• A managing director of information technology (IT) and operations, with 35 years of industry experience and 22 years of company tenure.
• A managing director of business analytics and project management, with 21 years of industry experience and 11 years of company tenure; and
• A business services manager, with 13 years of industry experience and company tenure.

Reporting jointly to the executive managing director and the CBRELS audit committee are a chief legal officer with 11 years of legal industry experience and two years of company tenure, and a managing director of compliance with 34 years of industry experience and company tenure.

In addition to these departments, CBRELS utilizes CBRE's shared services that are available to CBRE Capital Markets' affiliates, including the finance, IT, human resources, marketing, legal, and compliance groups.

CBRELS currently outsources various servicing-related tasks to Genpact, a third-party service provider with operations in Gurgaon, India. As part of the current service-level agreement with Genpact, the company plays a substantial role in hiring and management of the Genpact team. CBRELS has worked with Genpact since 1998 and there is a dedicated Genpact team of approximately 118 employees who assist with a variety of tasks, including bank reconciliations, operating statement analysis, new loan setup, and escrow analysis. Most of the processes outsourced do not involve borrower interaction. Those that involve borrower communication are primarily through scripted emails. With the current contract term running through June 2023, the CBRELS team indicated plans to begin working on an extension later this year. CBRELS management has indicated that the risks of a potential relationship termination is mitigated by the following:

• Genpact performs only back-office processes that can readily be transferred back to CBRELS.
• Genpact does not house any CBRELS data and provides no analytical services.
• CBRELS staff perform quality control reviews of Genpact's work and could perform the work themselves if needed, albeit at higher cost.

CBRELS has increased staff levels by over 38% (keeping in line with increases in loans and UPB) since our last review, which is much higher than other STRONG-ranked peers. The majority of staff growth in 2021 occurred in asset management (83%), operations (41%), and portfolio management (13%).

Employees are working in a hybrid environment with the CBRELS office open to all employees, but with no requirement that they work in the office. The company is working on a plan to create a formal remote work policy to balance the need for employees to be in the office to collaborate and provide the flexibility of a work from home schedule. Once the plan is authorized, it is anticipated that employees will be in the office two to three days per week. Additionally, management indicates it is open to more employees working in a full-time remote capacity, which expands its potential candidate pool.

Recent turnover levels have increased since the last review, but are at the median level of non-insurance company STRONG-ranked peers. During 2021, CBRELS had an overall turnover rate of 22%, which management believes was related to market and industry forces including a tight labor market making it difficult to retain talent in the same manner as in previous years. For 2020, CBRELS had an overall turnover rate of just over 9%.

Table 2

Training

CBRELS, within a larger corporate CBRE initiative, implemented a new tool called Talent Coach, which enhances the online training offerings to management and staff while also providing a performance assessment platform. This tool provides all levels of employees with a diversified array of ongoing, formal, internal and external training programs, as well as job-specific training. This is representative of similarly sized peers. CBRELS targets 40 hours of training per employee annually, which we believe is adequate. On average, employees completed 42 hours of training during 2021 and 44 hours of training in 2020. Other training features include the following:

• CBRELS has dedicated training staff who work with managers to develop, implement, and track training.
• CBRELS utilizes detailed process maps in conjunction with policy and procedure manuals for both training and reference with all process maps reviewed and updated in 2021.
• Over 20 additional commercial real estate (CRE) servicing-related training opportunities added to course selection options during 2021.
• Training needs are assessed on a quarterly basis by the CBRELS senior management team to ensure that training offered is meeting the needs of the organization.
• Training courses include corporate-level training on topics such as ethics, harassment, and confidential information, and computer security, along with industry-specific courses, including those sponsored by the GSEs and the MBA.
• CBRELS also holds job-specific training on internal systems and processes. General education courses are also offered for Microsoft Office products.

Systems and technology

CBRELS has effective technology to meet its primary servicing requirements. Its servicing operations are supported by 20 allocated information technology (IT) personnel. The company has a highly automated servicing process, including loan and portfolio surveillance and managerial compliance tracking. While CBRELS has maintained the same version of McCracken Financial Solutions Corp.'s (McCracken's) Strategy since the last review, management has worked with the vendor to write specific mapping tools for current and future loan migrations and plans a version update in second-quarter 2022. CBRELS also has well-designed data backup routines and disaster recovery (DR) preparedness. Key elements of its systems and applications, business continuity (BC) and DR programs, and security environment are discussed below.

Servicing system applications 

• McCracken's Strategy is the system of record; the company currently employs version 19A and has plans to update to version 19F in part to aid in the transitioning of loans from LIBOR to secured overnight financing rate (SOFR) in the fourth quarter of 2022. McCracken is subject to a service auditors' examination (SOC-1) performed by an independent certified public accountant firm.

A newly rebuilt borrower portal to allow for a more robust client experience with an updated and enhanced borrower dashboard, as well as additional layers of validation and security, which is scheduled for release in the second quarter of 2022.

• The DataMine Investor Portal, an investor website that provides virtually all data, documents, and reports on loans, was upgraded to provide more customization, improved metrics and information, and the utilization of cloud analytics, and is scheduled for release in the second quarter of 2022.
• The CORA LiveSpread platform is an artificial intelligence/machine learning based application for commercial real estate financial statement spreading.
• Proprietary applications are used for property insurance administration (IFAST), reserve administration (RMS), compliance tracking (CTS), request tracking (RTS), IT requests (Request IT), bank reconciliation (BankRecs), and personnel tracking (PTS).
• RMS system updated programming language from VB6 and added new graphic user interface (GUI).
• Field-level encryption added in iSeries upgrades system.

Business continuity and disaster recovery  

CBRELS has detailed crisis management and business continuity plans that are further developed and tested in consultation with CBRE's IT/security and compliance teams. It leverages CBRE corporate resources for hot-site relocation capabilities and IT failover support. Highlights include:

• Annual testing is performed on the SQL database servers and application servers that feed CBRELS' systems, which are housed and managed at the CBRE data center in Dallas with a backup in Atlanta.
• CBRE's digital and technology department provides DR testing for a separate iSeries server.
• CBRELS has designated a backup servicing location at a separate site in Houston, as well as in Dallas where CBRELS IT, the CBRE loan services crisis management team, and select clients test the company's crisis management plan, as well as recovery procedures annually.
• Employees have remote access to all servicing systems required to perform their responsibilities using company supplied laptops equipped with virtual private network (VPN) access.
• Targeted recovery timeframes for all servicing functions are within industry norms, with virtually no interruption in payment processing.
• The most recent annual DR test was completed in September 2021 with no material issues identified.

Since the company implemented its DR/BC plan in March 2020 due to the COVID-19 pandemic, there have been no interruptions to service in the operations or data facilities reported. CBRELS indicates that their offices are open to employees at this time, but that there is no requirement to come to the office. They continue to prioritize vendor oversight with all U.S.-based and offshore vendors continuing to maintain servicing standards.

Cybersecurity  

CBRELS has a formal cybersecurity protection plan, as well as a stand-alone cyber insurance policy. All internal and external applications undergo an initial security risk assessment when introduced into CBRE's environment. Additional cybersecurity procedures include annual third-party network penetration testing, monthly phishing emails sent to employees, and multi-factor authentication (MFA) for VPN access. The most recent third-party network penetration test was performed during December 2021 with no material problems cited.

Internal controls 

CBRELS maintains strong internal controls that include extensive and well-documented policies and procedures, a quality control environment that includes proactive, well-documented compliance, as well as internal and external audits. These areas are discussed in the below subsections.

Policies and procedures 

Policies and procedures (P&P), supplemented by detailed process maps, are tailored to various transactional and functional activities based on investor requirements.

Process maps, and P&P manuals are saved to public file folders for easy access. The process maps are relied upon for training, references on non-routine processes, and for understanding and transitioning new processes. According to management, the process maps are reviewed annually or ad-hoc if significant process changes occur. CBRELS tracks the dates that the P&P were reviewed and updated, similar to most STRONG-ranked servicers, with the most recent update performed in December 2021.

Compliance and quality control 

CBRELS has a compliance group of six employees who perform reviews of controls and procedures of loan administration functions as part of its quality control program. The scope includes a quarterly review of various servicing processes and systems using a small sampling of loan files and system records to ascertain adherence to procedures. The compliance staff oversees the dissemination of the quarterly measurement reports to senior management and monitors corrective actions.

The most recent review was completed in March 2022, for the period of Oct. 1, 2021, to Dec. 31, 2021, focused entirely on Freddie Mac portfolios, both pre and post securitization, with no material findings reported.

CBRELS uses numerous tools to ensure compliance with servicing duties and investor requirements.

• Its proprietary RTS application is used for system and record changes (requiring reviewer approval). RTS system enhancements were made in 2021 with additional updates scheduled for 2022;
• CTS is used for calendaring compliance events and notices, as well as report production for compliance assurance;
• Other applications like IFAST (insurance) and RMS (reserves) have built in capabilities for tracking investor/loan requirements; and
• The Strategy release 19A portal (R19A Portal Process Management Tool) provides the ability to build process workflows, and tracking and management oversight.

Internal and external audits 

The CBRELS audit committee, formed in 2016, is comprised of the executive managing director of CBRE Capital Markets, the managing director of accounting (finance) of CBRE Capital Markets, the general counsel of CBRE Capital Markets and the managing director of compliance. The committee reviews findings from audits before presenting to the CBRELS directors. The scope for the coming year's audit schedule is developed annually with committee input based on industry changes and external audit findings.

CBRE Global Internal Audit (GIA) completed its audit in early 2021 and issued the final report in May 2021. This audit focused on governance, cash management, and certain portfolio and operational functions. There were some findings noted in the report with action plans submitted and accepted by GIA. At the request of CBRELS management, this group audits the company on a three-year cycle.

The company is subject to numerous external audits throughout the year, including SSAE 18/SOC1, Uniform Single Attestation Program (USAP), Freddie Mac, and Fannie Mae, master servicers, and regular audits for other third-party servicing assignments. The following are the latest results:

• There were no material findings in the latest SOC1 Type II report for the period Oct. 1, 2020, through Sept. 30, 2021.
• The USAP certification for the year ended Dec. 31, 2021, noted no exceptions.
• There were no significant findings in the Fannie Mae 2021 audit. The 2021 Freddie Mac audit indicated some findings which were addressed with Freddie Mac.

Vendor management

CBRELS has well-controlled and sound procedures governing vendor oversight. It engages third-party vendors to provide services including property inspections, flood zone searches and updates, Uniform Commercial Code (UCC) tracking, and real estate tax servicing. The process includes the following:

• Vendors are selected based on qualifications, past experience, and ability to meet CBRELS servicing standards.
• All work performed for CBRELS by third parties is reviewed for quality, accuracy, and completeness.
• Compliance works closely with functional managers to monitor ongoing performance and contractual requirements for each vendor.

As previously noted, CBRELS outsources various servicing-related tasks to Genpact. Genpact provides an ISAE 3402 Assurance Report (US equivalent of the SSAE 18 SOC 1 report) as well as normal vendor monitoring.

Critical suppliers and service providers may be required to provide evidence of BC and DR planning. Management reports it has been keeping close contact with all vendors throughout the pandemic and to-date, none are experiencing any issues in meeting CBRELS servicing standards.

Insurance and legal proceedings

CBRELS has represented that it maintains adequate directors and officers, as well as errors and omissions insurance coverage given the size of its portfolio. As of the date of this report, management of CBRELS says it is not subject to, or knowledgeable of, any material lawsuits that could affect the servicing operations.

Loan Administration

The loan administration subranking is STRONG.

CBRELS' primary servicing portfolio has experienced robust, double-digit growth in terms of UPB and the number of loans since 2017 (see table 3). This demonstrates the company's success in continuing to execute its business plan, which encompasses organic growth from its existing clients; new opportunities within the debt fund market, private equity firms, and banks, including foreign banks with commercial mortgage loans secured by U.S. properties; and industry consolidation of the life-company/correspondent servicing model which has increased its market share as a roll-up servicer for life companies with numerous correspondent relationships. As previously noted, portfolio growth included the migration from other servicers of seven portfolios totaling $35 billion in UPB and comprising over 4,500 loans. This included a portfolio of 4,000 agricultural loans with a UPB of $20.0 billion for which the client is a life insurance company (see table 4).

The company's new loan originations, combined with migrations from other servicers, totaled approximately $77 billion in UPB and 6,076 loans for the year ending Dec. 31, 2021, compared to over $44 billion in UPB and 2,139 loans for the year ending Dec. 31, 2020. CBRELS performs maturing loan and runoff analysis as part of its portfolio management strategy. For the year ending Dec. 31, 2021, payoffs totaled approximately $30 billion in UPB (40% of same period originations) and approximately 1,500 in loan count (25% of originations in the same period). Maturing loans in each of the years from 2022 through 2026 do not exceed $28 billion in UPB and approximately 950 loans in any one year, which indicates a limited risk of portfolio runoff.

Although delinquency rates have ticked up during 2021, they remain at low levels (see table 3). The portfolio is geographically dispersed and is diversified by major property types, though approximately 57% of the portfolio UPB is secured by multifamily properties (see table 4). The portfolio's largest investor type is life insurance companies (54% of UPB and loan count). Other large investor clients include Freddie Mac K-series (25% of UPB and 31% of loan count) and Fannie Mae (14% of UPB and 10% of loan count) (see table 5).

Table 3

Table 4

Table 5

New loan boarding

Based upon its stated practices and written procedures, CBRELS has a sound loan setup function that includes 13 dedicated staff. Control and other features of new loan setup include:

• CBRELS utilizes CBRE's pipeline system to expedite setup, identify lenders with pre-closing requirements, and provide a means to notify upcoming loan closings.
• Pre-closing and post-closing checklists, as well as loan setup worksheets are used to ensure quality.
• Third-party tax service vendor data are checked and uploaded to the servicing system, and file imaging systems are validated against loan documents and setup sheets.
• System error reports are generated and the operations area performs internal document-to-system checks to confirm accuracy of the information.
• The document tracking system enables follow up and escalation for missing documents, as well as the ability to see missing document trends to give feedback to lenders.
• The loan setup department also manages the boarding of portfolio acquisitions and the de-conversion of sold portfolios.
• Welcome letters are distributed to new borrowers electronically, approximately three business days after loans are boarded.

Payment processing

CBRELS' practices and integrated technology tools efficiently address payment processing with sound internal controls over payment posting and reconciliation, including proper segregation of duties. Highlights of payment processing, which has five dedicated internal staff, include:

• All fund receipt and transfer activities, including incoming payments and outgoing disbursements, are detailed within the procedure manual.
• As of Dec. 31, 2021, CBRELS received 100% of borrower payments electronically via wire transfer, automatic clearing house (ACH), or lockbox.
• CBRELS reported one item held in suspense for 90 or more days as of Dec. 31, 2021. According to management, a borrower consistently sends in extra funds with their payment each month, and CBRELS does not apply partial payments. The aged funds were remitted back to the borrower Jan. 20, 2022, and CBRELS is trying to get the borrower registered for ACH to prevent recurrence of this issue.
• Management has reported that cash operations personnel have remote access to all necessary systems for incoming payment processing (including servicing systems, banking websites, etc.).

Investor reporting

CBRELS has efficient and effective investor reporting, remitting, and accounting processes with appropriate internal controls. The company has a high level of experience with life insurance company, GSE, and a variety of third-party investor clients, and maintains the capability to conduct CMBS investor reporting. It has six dedicated staff members for the various investor reporting and operational accounting activities that are properly segregated for reporting, remitting, and related account reconciliation processes. Other highlights include the following:

• Each portfolio is assigned a portfolio manager and an investor reporting analyst who coordinate the delivery of investor-required annual, semiannual, and quarterly certifications with the compliance department.
• Multiple-level control checks ensure pools are properly reported and remitted.
• Separate dedicated units within the operations group handle investor reporting and remittance wire transfers.
• Investor or deal abstracts are established in the CTS, which aids in monitoring requirements, as well as with reporting and remitting calendars.
• Dedicated reporting teams are assigned to each investor group.
• All reporting is electronic and includes proper controls over cash movement, with remittances handled via the cash department's wire desk.
• An online bank account and integrated account reconciliation program facilitates custodial account reconciliation.
• Management has reported that investor reporting personnel have remote access to all systems required to prepare and submit lender remittance reports and wire transfers.

Escrow administration

CBRELS has sound controls for escrow administration activities. The company has dedicated teams for tax (six staff members) and insurance (23 staff members) administration, and asset managers handle loan-level reserve monitoring and analysis for other escrowed events such as tenant improvement and replacement reserves. Other features include the following:

• The tax department sets up escrowed and non-escrowed loans with a tax service that obtains tax bills and reports delinquent taxes to the tax department and portfolio management.
• Tax data from the service provider is integrated into the Strategy servicing system. Genpact works with the tax service to update the servicing system records to reflect the annual tax escrow analysis. It then informs CBRELS' tax administrators of potential future shortages on escrowed loans.
• The tax department processes the payment of taxes on escrowed loans prior to the delinquency due date or discount dates when offered, performs escrow analysis annually, verifies that taxes have been paid on non-escrowed loans, sends escrow shortage letters to borrowers, monitors delinquent taxes, and processes tax refunds.
• The insurance department is responsible for maintaining insurance records for all loans serviced and ensuring that all insurance requirements in documents and servicing agreements comply.
• The insurance department also procures insurance invoices, processes insurance premium payments, monitors escrow accounts for overages and shortages, verifies that insurance has been paid for non-escrowed loans, and force places insurance coverage to protect the lender's or investor's interest.
• System-generated insurance renewal notices for escrowed and non-escrowed loans are sent 45 days before expiration.
• Insurance analysts contact borrowers directly to clear escrow deficiencies.
• Force placed insurance coverage has a 120-day look-back provision for property insurance and a 45-day look-back provision for flood insurance. CBRELS force places insurance for deficient loans immediately upon notification that the deficiency will not be cleared or no later than 60 days after the policy expires. As of Dec. 31, 2021, CBRELS had six loans that were force placed.
• Of the primary serviced loans in CBRELS' portfolio, approximately 42% maintained tax escrows, and approximately 22% had insurance escrow accounts, as of Dec. 31, 2021.

Asset and portfolio administration

CBRELS has good controls to ensure that property operating statements and inspections comply with the company's policies, servicing agreements, and loan documents. The company also maintains a sound portfolio surveillance function that proactively examines asset and portfolio-level performance. It provides a well-detailed investor website (requiring log-in credentials) that contains deal- and loan-level performance data. Asset and portfolio administration tasks have 102 dedicated staff supporting the area. Other notable features include:

CBRELS utilizes the McCracken R19 Portal for many asset and portfolio administration functions including the following:

• Standardized processing, centralized monitoring of all product lines, financial statement collection and analysis, and a single system to monitor all debt service coverage ratio (DSCR) and net operating income (NOI) covenants as required under the loan documents.
• The capability to create custom operating statement analysis report forms specific to institutional clients, with documentation and tracking of input, quality control, and delivery to lenders.
• The portal is used to generate a watchlist for CMBS loans that is compliant with CREFC 8.0 IRP requirements. Automated watchlist criteria include payment delinquencies, advances, DSCR, poor property condition, occupancy issues, tenant rollover, and maturing loans.
• A dedicated CBRELS team, with the assistance of Genpact analysts, monitors adherence to loan covenants by creating ticklers in the McCracken portal. As of Dec. 31, 2021, CBRELS is monitoring over 6,000 recurring loan covenants, with covenants increasing across agency and institutional portfolios, driving the need for increased staffing levels for covenant setup and management.
• CBRELS' surveillance department handles financial statement collection, analysis, and reporting processes across product lines. Genpact spreads borrower operating statements using the McCracken portal. As of Dec. 31, 2021, CBRELS received and analyzed 99% of year-end 2020 operating statements.
• CBRELS outsources most property inspections to third-party vendors. Per many servicing agreement requirements, any property with a UPB greater than $2 million must be inspected annually. During 2021, CBRELS had nearly 5,000 properties inspected with no inspection reports received later than 30 days past the due date. Genpact records deferred maintenance items and CBRELS and Genpact analysts' follow up with borrowers as necessary.
• A separate department tracks UCC filings after setting them up in iLien, a third-party vendor online system. As of Dec. 31, 2021, management reported no lapsed continuation filings for the over 13,000 loans requiring UCC filings during the prior six months.

Borrower requests

CBRELS addresses borrower request activity in a well-controlled manner with a group of 17 staff members allocated to support their analysis. Highlights include the following:

• Borrower requests are tracked and monitored in Strategy Process Manager. The R19 Portal provides improved workflow management as requests move through the document collection, underwriting, and approval processes. It is a single system that provides easier access to loan information; and improved dashboards enabling management at-a-glance review of transaction status and volume.
• CBRELS has dedicated customer service representatives, a main toll-free phone number, and an email address for borrower inquiries.
• Customer service representatives directly respond to informational requests; however, requests requiring credit approvals are forwarded to the respective portfolio management groups.

During 2021, CBRELS processed 726 borrower requests with an aggregate UPB of approximately $12.2 billion. By number, request actions were as follows:

• Releases--partial property/collateral and escrows (37.5%);
• Repair escrow extensions/modifications (12.2%);
• Insurance waivers (11.0%);
• Other miscellaneous (10.0%);
• Management changes (9.8%);
• Transfers of ownership (7.0%);
• Late charge waivers (4.4%);
• Loan assumptions (4.0%);
• Leasing activity (1.6%);
• Easement--no adverse value impact (1.5%);
• Forbearance requests (0.7%); and
• Substitution of collateral (0.3%).

During 2020, CBRELS processed 858 borrower requests with an aggregate UPB of $14.7 billion. By number, request actions were as follows:

• Forbearance requests (31.9%);
• Management changes (12.7%);
• Insurance waivers (11.9%);
• Repair escrow extensions/modifications (11.5%);
• Other miscellaneous (10.0%);
• Easement--no adverse value impact (6.9%);
• Loan modifications (5.9%);
• Loan assumptions (4.1%);
• Transfers of ownership (3.7%);
• Leasing activity (0.7%);
• Releases--partial property/collateral (0.6%); and
• Substitution of collateral (0.1%).

Early-stage collections

CBRELS has five allocated staff members to handle early-stage collections. Noteworthy features include the following:

• Daily delinquency reports are automated and emailed to portfolio managers and analysts and reviewed by management.
• CBRELS calls borrowers on the fifth day of delinquency. As a best practice, we note that most other STRONG ranked servicers call borrowers earlier in the delinquency process.
• System-generated payment reminders are sent on the 11th and 20th days of delinquency. The servicing system maintains current and historical collection information.
• Delinquency reports are reviewed weekly by the managing director of portfolio management to ensure collection efforts are compliant with procedures and appropriate efforts are undertaken by staff.

Financial Position

The financial position is SUFFICIENT.

Related Research

• CBRE Group Inc. Outlook Revised To Positive On Stronger-Than-Expected Operating Performance; 'BBB+' Ratings Affirmed, May 26, 2022
• Select Servicer List, April 19, 2022
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• CBRE Services Inc., April 9, 2021
• Servicer Evaluation Spotlight Report™: Environmental, Social, And Governance Factors Have Consistently Powered Our Servicer Evaluation Rankings, Nov. 16, 2020
• Servicer Evaluation: CBRE Loan Services Inc., Sept. 14, 2020
• Analytical Approach: Global Servicer Evaluations Rankings, Jan. 7, 2019