Rationale

S&P Global Ratings' rankings on Greystone Servicing Co. LLC (GSC) are STRONG as a commercial mortgage loan primary and special servicer. On March 26, 2024, we affirmed the rankings (please see "Greystone Servicing Co. LLC STRONG Commercial Mortgage Loan Primary And Special Servicer Rankings Affirmed."). The ranking outlook is stable for each ranking.

Our rankings reflect GSC's:

• Highly experienced and well-tenured senior management and loan servicing and asset management staff;
• Strong Fannie Mae, Freddie Mac, Federal Housing Administration (FHA), Ginnie Mae, U.S. Department of Agriculture (USDA), bridge, and CMBS origination platforms, which fuel primary servicing volume;
• Steady growth and successful track record in servicing agency lender clients and borrowers;
• Effective staff training;
• Good leverage of technology and servicing systems;
• Strong audit, compliance, and control environment;
• Limited primary servicing portfolio diversity in terms of property type (81% of unpaid principal balance [UPB] is multifamily) and investor type (88% of UPB from government sponsored/insured enterprises); and
• Substantial and efficient resolution track record of specially serviced loans and real estate-owned (REO) assets of all levels of complexity.

Since our prior review (see "Servicer Evaluation: Greystone Servicing Co. LLC," April 15, 2022), the following changes and/or developments have occurred:

• The primary servicing portfolio UPB increased over 17% to $70.6 billion as of Dec. 31, 2023, from $60.3 billion as of Dec. 31, 2021, which was accompanied with a 12% increase in the primary servicing staff.
• In the third quarter of 2022, the compliance director resigned to pursue another opportunity, and her duties were assumed primarily by an executive with 35 years of industry experience and 20 years of company tenure who transferred from the government-sponsored enterprise (GSE) consents team.
• With the resignation of the compliance director and to create more independence, the GSC compliance function was moved under corporate internal audit, and a chief compliance officer with approximately 25 years of industry experience was hired.
• In the fourth quarter of 2022, a director of asset management in servicing that was with predecessor entity C-III and had two direct reports, resigned to pursue another opportunity; his position was not replaced, and those responsibilities were assumed by GSC's long-tenured executive vice president.
• The active special servicing portfolio UPB decreased nearly 48% to $969.2 million as of Dec. 31, 2023, from $1.9 billion as of Dec. 31, 2021, with a stable headcount of special servicing staff.
• The company was named special servicer on eight new transactions totaling 353 loans with a UPB of over $7.0 billion.
• GSC's special servicing operation resolved 57 loans with a UPB of over $1.2 billion and sold 22 REO assets at gross sales proceeds of over $400.0 million.
• In 2022, the special servicing operation launched an associate training program in which the participants are exposed to and trained in all aspects of special servicing, including credit risk, asset management, and due diligence.

The stable ranking outlook for the primary servicer ranking reflects GSC's highly experienced and well-tenured servicing team, successful track record in servicing agency lender clients and borrowers, and track record of managing a substantial loan portfolio through multiple economic cycles.

Our stable ranking outlook for the special servicer ranking reflects the company's highly experienced and tenured senior management and asset management team, accompanied by a considerable resolution track record of specially serviced loans and REO assets across multiple economic cycles. Additionally, the company expects to continue to be appointed special servicer by an affiliate that invests in CMBS B-pieces while also pursuing assignments from third parties that do not have a special servicing platform. At current volume, we believe the company is adequately staffed and well-positioned to handle the challenges of an anticipated rising default environment in 2024.

In addition to conducting an on-site visit with servicing management, our review includes current and historical servicer evaluation analytical methodology data through Dec. 31, 2023, as well as other supporting documentation provided by the company.

Profile

GSC, an affiliate of Greystone & Co. II LLC (Greystone), has been a commercial real estate lender for over 30 years. Along with Greystone Funding Co. LLC, it specializes in originating and servicing multifamily loans and--to a lesser extent--health care properties on transactions of all sizes and complexities. GSC is one of the largest FHA-approved multifamily lenders based on the dollar volume it originates. In addition, the company is a major Fannie Mae Delegated Underwriting and Servicing lender, a Ginnie Mae issuer, a Freddie Mac lender, a USDA lender, a commercial mortgage-backed securities (CMBS) conduit lender, and a bridge loan lender.

GSC is wholly owned by Greystone Select Holdings LLC (GSH), which is wholly owned by Greystone Select Financial LLC (GSF). GSF is owned 60% indirectly by its chairman and CEO and 40% by Cushman & Wakefield (NYSE: CWK), a leading global real estate services firm with approximately 52,000 employees in over 400 offices and 60 countries.

GSC's primary servicing operations are largely based in Warrenton, Va., and its special servicing operations are based in Irving, Tex. Greystone, which is wholly owned by GSF, provides corporate support for the finance, compliance, and quality control; in-house legal counsel; human resources; and in-house IT functions. In addition, the company has affiliated real estate businesses that specialize in property management, development, investment banking, and portfolio management, with a primary emphasis on multifamily and health care property types.

GSC primarily services its own loan originations and those of its affiliates. Since our prior review, the company has increased its focus on obtaining third-party servicing contracts and currently provides servicing for five third parties and has recently executed agreements with nine additional third parties. GSC-originated products include Fannie Mae, Freddie Mac, pension fund, life insurance company, FHA, USDA, CMBS, and bridge investors. GSC's primary servicing operation includes 251 personnel that manage over $70 billion in UPB, primarily focused on multifamily (81% by UPB) and health care (12% by UPB) collateral as of Dec. 31, 2023.

GSC's special servicing operation--which included 40 employees as of Dec. 31, 2023--is the named special servicer for 48 CMBS deals containing 1,256 loans with a UPB of $21.5 billion; 15 Freddie Mac securitized deals containing 723 loans with a UPB of $3.9 billion; and five CRE-CLO deals containing 69 loans with a UPB of $2.1 billion. At the time of our prior review (as of Dec. 31, 2021), GSC was the named special servicer for 64 CMBS deals containing 972 loans with a UPB of $17.6 billion, 14 Freddie Mac securitized deals containing 819 loans with a UPB of $3.8 billion, and five CRE-CLO deals containing 97 loans with a UPB of $2.4 billion.

The company's named CMBS portfolio is largely derived by appointments by an affiliate that invests in CMBS B-pieces, although management also pursues CMBS assignments from third parties that don't have a special servicing platform.

The active portfolio includes 33 assets totaling $969.2 million in UPB, consisting of eight REO assets and 25 loans secured by 33 properties.

Table 1

Table 2

Management And Organization

The management and organization subranking is STRONG for commercial mortgage loan primary and special servicing.

Organizational structure, staff, and turnover

GSC's primary servicing unit is led by an executive vice president (EVP) with 37 years of industry experience, the last 18 of which are with GSC. The primary servicing management team and staff exhibit levels of industry experience and tenure levels that are largely consistent with those of the highest ranked servicers. Its comparatively low turnover levels of 8% in 2023 and 16% in 2022 are viewed favorably, particularly during a tight labor environment.

As of Dec. 31, 2023, the primary servicing staff included 251 full-time employees, up 12% from our prior review to support a servicing volume UPB increase of over 17%. Loans per full-time employee is approximately 25, less than most similarly ranked primary servicers, which we believe is due to higher-touch servicing required for its portfolio.

The primary servicing platform comprises eight key functions reporting directly to the EVP of servicing and asset management (SAM), that include:

• Compliance and covenant management, led by a director with 35 years of industry experience and 20 years of company tenure, who moved into this role in the third quarter of 2022;
• Securities and document management, led by a senior vice president with 37 years of industry experience and 30 years of company tenure;
• Custodial accounting, led by a vice president with 23 years of industry experience and 20 years of company tenure;
• Loan administration and customer care, led by a senior vice president with 43 years of industry experience and 23 years of company tenure;
• Fannie Mae, Freddie Mac, pension fund, alternative agency, and life company (FM) asset management, led by a vice president with 18 years of industry experience and 13 years of company tenure;
• Investor relations and FM payoffs, led by a vice president with 14 years of industry experience and six years of company tenure;
• FM loss mitigation and special servicing, led by a vice president with 35 years of industry experience and three years of company tenure; and
• FHA, USDA, and non-agency asset management, led by a senior vice president with 45 years of industry experience and 29 years of company tenure.
• In addition, though not specifically part of the primary serving operations, three in-house attorneys and the Greystone general counsel are dedicated to primary servicing legal matters.

GSC's special servicing unit is led by its president with over 25 years of industry experience and 10 years tenure with GSC. The president has the following three direct reports:

• A vice president and senior managing director who heads the special servicing and asset management operations with over 25 years of industry experience, the last 20 of which are with GSC and its predecessor entity C-III Asset Management (C-III);
• A managing director responsible for business development and identifying strategic relationships with 13 years of industry experience and who joined GSC in 2021; and
• A managing director responsible for sourcing and acquiring subordinate bond positions with 30 years of industry experience and who joined GSC in 2019.

As of Dec. 31, 2023, the special servicing staff included 40 full-time employees. The special servicing management team and staff exhibit levels of industry experience and tenure levels that are largely consistent with those of similarly ranked servicers. Turnover levels were 20% in 2023, and 13% in 2022.

The following functions report directly to the vice president and senior managing director:

• Asset management and transactions (includes asset management, loan resolutions, and REO dispositions), led by a managing director with 38 years of industry experience, and 20 years of company tenure that includes C-III;
• Asset management and portfolio management (includes asset management, pre-transfer monitoring, and credit review), led by a managing director with over 25 years of industry experience and nearly eight years of company tenure that includes C-III;
• Portfolio oversight (includes investor reporting, surveillance, tax and insurance administration, and borrower consents/requests), led by a managing director with over 20 years of industry experience and 20 years of company tenure that includes C-III;
• Finance/due diligence, led by a managing director with 23 years of industry experience and 17 years of company tenure that includes C-III;
• Accounting, led by a managing director and controller with over 25 years of industry experience and 16 years of company tenure that includes C-III; and
• Legal, led by the general counsel with over 20 years of industry experience and company tenure that includes C-III.

Table 3

Training

GSC provides its employees with a solid training and development program, and it benefits from strong corporate support. The company targets an annual minimum training requirement of 40 hours per primary servicing employee, which is consistent with that of similarly ranked servicers, and 20 hours per special servicing employee, which is generally below that of similarly ranked servicers. For 2023, GSC primary servicing employees averaged 61 hours of training, and special servicing employees averaged 23 hours. For 2022, GSC primary servicing employees averaged 65 hours of training, and special servicing employees averaged 22 hours.

Other training features considered in our assessment include the following:

• The human resources department of Greystone has dedicated full-time training personnel that support the company.
• The internally developed Greystone University is the core software used to track and store training.
• Internal and external guest speakers conduct training seminars. Recent seminars have covered such topics as systems software, technical servicing processes, property valuation, phishing, property inspections, financial analysis, consent processing, various market analyses, and research publications.
• GSC employees also attend webinars, classes, and conferences offered by the Mortgage Bankers Assn., Fannie Mae, Freddie Mac, FHA, Commercial Real Estate Finance Council (CREFC), and other outside vendors.
• Core training requirements include courses on ethics, sexual harassment policy, and fraud detection, and elective training opportunities include courses on business writing, presentation skills, and customer service.
• All new employees are required to review and provide written acknowledgement of the employee policy manual.
• The company offers a tuition reimbursement program.
• The Asset Management Academy within FM primary servicing was established to grow asset managers from within the company. Team members spend three to six months in rotations where they learn about the roles and responsibilities of the six FM AM teams. Upon completion of the rotations, the team members have the opportunity to explore open positions in FM AM.
• The Associate Training Program within special servicing involves an introductory bootcamp that overviews foundational topics in commercial real estate, CMBS and special servicing, and is followed by a series of projects with exposure to various groups, including portfolio management, SS, investor reporting, and due diligence.

Systems and technology

GSC has effective technology to meet its servicing requirements. The company continues to focus on technology enhancement projects to further streamline and automate servicing tasks across various loan administration functions. GSC has well-designed data backup routines and disaster recovery preparedness. As of Dec. 31, 2023, there was a 24-person technology team dedicated specifically to GSC as well as 133 technology personnel allocated or available from an in-house IT department to support all GSH's businesses, including servicing operations. Other notable features considered in our assessment are outlined in the subsections below.

Servicing system applications

Highlights of the applications the company uses to perform primary servicing are as follows:

• GSC's system of record for primary loan servicing is Benedict Loans (Benedict). Benedict handles loan accounting and most core servicing processes, and it has robust reporting capabilities. It is interfaced with the corporate general ledger (Business Central) and linked to the loan origination system (Closer).
• Closer, which is integrated with SalesForce (the origination CRM), maintains the loan origination pipeline and tracks loan progress.
• GSC uses the OnBase system for document imaging and record retention.
• Microsoft Dynamics creates additional workflows for customer relationship management (CRM), customer care ticketing, and asset management functions, including workflow tracking for consents, delinquencies, disbursements, internal valuation estimates, insurance losses, insurance renewals, loan boarding, natural disasters, suspense funds, repairs, deferred maintenance, and watchlist management.
• Proprietary systems, which complement the core servicing system, include a customer center website; a loan servicing suite, investor databases for Fannie Mae, Freddie Mac, and Ginnie Mae; and risk rating systems (one application for risk rating the Fannie Mae and Freddie Mac portfolios, and one application for all other portfolios, including FHA).
• The loan servicing suite of applications includes a number of complementary modules that interact with the Benedict application, including a financial statement module that allows for the tracking and spreading of financial statements; a closing log that tracks loan closings, payoffs, re-finances, securitizations, etc.; a construction budget tracker; a robust reporting module that interacts with all complimentary databases; and a correspondence tool that creates letters to borrowers and management contacts.
• Loan covenants are tracked in the servicing system and in outside databases, which are integrated into Microsoft Dynamics.

Highlights of the applications the company uses to provide special servicing are as follows:

• LoanSSTAR is a proprietary, fully integrated, web-based real estate finance database that is the special servicing workout system and is also utilized for CMBS due diligence. It captures all loan and property details, performs various calculations such as lease rollover and loss, and generates asset reporting. In addition, it contains modules for third-party reports, asset strategy reports, CREFC investor reporting, fees, and REO asset management.
• The surveillance app provides dashboards to monitor monthly reporting progress and status utilized in performing loan asset management.
• The compliance module provides compliance tracking and reporting.
• The revenue sharing module manages fee splits with third parties.
• The newly developed consent request module is a proprietary web application used by the transactions team to submit and track consent requests and fees on performing loans.
• LegalSSTar is a proprietary application used by the legal department to track specially serviced loans, monitor litigation matters and budgets.

The above applications are all seamlessly integrated. These applications/modules also integrate with SharePoint and Microsoft Teams for document management.

Business continuity and disaster recovery

The company maintains robust business continuity and disaster recovery strategies, including well-documented and comprehensive plans, a dedicated response team, and innovative risk analysis methodologies. Data is backed up daily, and data backup systems and policies are in place.

The company maintains a formal business continuity plan that was last updated in December 2023. Management has indicated that all employees are able to work remotely if an internet connection is present. In-office requirements vary by group and function and to encourage attendance weekly meetings and periodic retreats are held in the offices to get employees together.

Disaster recovery tests are conducted annually by the information technology (IT) group, with the most recent testing conducted in August 2023 for primary servicing and February 2023 for special servicing. The entire primary servicing recovery exercise was completed in three hours, and no material problems were cited. The network resource was recovered fully in 30 minutes. The entire special servicing recovery exercise was completed in four days, and no material problems were cited. The network resource was recovered fully in 30 minutes. Plans call for remittance and reporting capabilities to be restored in one hour and other servicing functions to be recovered within two hours.

Cybersecurity

Greystone maintains an enterprise information security policy that establishes the scope, direction, and tone for all the organizations security efforts. The policy sets responsibilities for different areas of information security, including maintenance of the policies, practices, and responsibilities of the end users. In addition, the company carries a stand-alone cyber insurance policy. However, unlike most servicers we rank, GSC doesn't have in-house legal expertise or third-party legal counsel on retainer for cybersecurity matters.

Greystone's security process for protecting private information is detailed through its internal control objectives, which are presented in the annual SOC 1 Type 2 and SOC 2 Type reports. Greystone performs internal audits every three months, which include tests of all security controls. The most recent audits were in October 2023 (for the period of July through September 2023), and July 2023 (for the period of April 2023 through June 2023). There were no significant findings in either audit. In addition, GSC engages third parties to perform external network security assessments. The most recent assessment was in June 2023; no critical or high findings were issued. Policies call for any findings to be remediated and for new IT security best practices to be implemented. Key web applications have penetration tests performed annually or after significant changes have been made.

Additional security procedures include background checks on all IT employees; stringent physical security measures at its datacenter; logical firewall protection on all ingress/egress network points; and multiple third-party security assessments (i.e., targeted, site-specific, and broad, whole-network based). In addition, user access audits are performed at least annually for key systems. System access lists are compared to active employees. Elevated rights are confirmed with appropriate approvers.

Internal controls

GSC maintains solid internal controls, including well-written and comprehensive policies and procedures (P&Ps), a dedicated compliance director, and a sound audit program to ensure compliance with its contractual servicing obligations, as well as accepted servicing practices. Features considered in our assessment are noted below.

Policies and procedures

• GSC primary servicing utilizes separate P&P manuals for each investor product type that include detailed procedures for each servicing function.
• The special servicing P&P documents consist of detailed sections devoted to overall corporate requirements (e.g., conflict protocols for transactions with affiliates, procedures for identifying and communicating material nonpublic information, etc.) as well as for each operational need. System screens display the workflows as applicable.
• P&Ps (general and desktop procedures) are accessible on a shared network drive, and senior managers of the servicing and asset management departments are responsible for reviewing and updating them annually, or more frequently as required. All P&Ps were last updated in the first quarter of 2023.
• In the fourth quarter of 2022 the primary servicing standard operating procedures, formerly referred to as desktop procedures, were revised.
• The corporate legal team reviews the employee policy manual annually, and all changes are further reviewed and approved by senior management and human resources.

Compliance and quality control

As noted earlier, to create more independence, the GSC compliance function was moved under corporate internal audit, and a chief compliance officer with approximately 25 years of industry experience was hired. Reporting to the EVP of servicing and asset management is a director with 35 years of industry experience and 20 years of company tenure who has compliance responsibilities that include, but are not limited to:

• Managing external audits for investors, rating agencies, and master servicers;
• Coordinating internal audits with corporate auditors;
• Ensuring timely updates of SAM's internal departmental P&Ps; and
• Managing SAM's vendor oversight process and vendor scorecard.

An internal audit and compliance testing matrix has been established for the GSC special servicing operation. The process involves the following quality control and audit functions performed by Greystone's internal audit group, which reports to the audit and compliance committee and special servicing management.

• On a monthly basis, the adherence to due dates are confirmed for appraisals, asset status reports, fair value determinations, and inspections.
• On a quarterly basis, an audit of assets is performed to ensure compliance with established procedures, testing the operating effectiveness of the special servicing P&Ps and matrices.
• On a semi-annual basis, an audit of REO assets managed by third-party property managers is performed to review compliance with established procedures and test the operating effectiveness of cash management controls and accounting controls in accordance with the property management agreement.

Internal and external audits

GSC is subject to a variety of annual external audits, including those from Fannie Mae, FHA, Freddie Mac, Ginnie Mae, and the USDA. We found limited exceptions in the most recent audit reports we reviewed, none of which were material.

GSC also has an internal audit program that is conducted on a rotational basis, and semi-annually at a minimum of various primary servicing operations, and quarterly of special servicing to ensure compliance with each servicing agreement. The most recent audits of primary servicing were of the USDA annual lender reports in November 2022, Fannie Mae loan boarding in July 2023, and FM payoffs in December 2023, none of which contained material exceptions. In addition, the audit reports indicated that management and their staff demonstrated a strong understanding of functions performed. The most recent audit of special servicing for the quarter ending Dec. 31, 2023, indicated it was operating in general compliance with established procedures, with no material issues or variances.

For the fiscal year ended Dec. 31, 2023, the Uniform Single Attestation Program (USAP) for mortgage bankers reported that GSC complied in all material respects with the company's established minimum servicing standards. The company's assets that are subject to the USAP minimum servicing standards included all special servicing contracts. For the fiscal year ended Dec. 31, 2023, the Regulation AB examination covering GSC's named special servicing and primary servicing portfolios cited no exceptions.

Vendor management

SAM utilizes a number of third-party vendors for various traditional servicing activities, including property inspections, financial statement spreading, broker price opinions, physical need assessments, Uniform Commercial Code (UCC) filings, tax services, flood determinations, insurance policy reviews, and force-placed insurance.

The vendor oversight process is a responsibility of the director of investor relations and rating agencies. We believe that GSC's close monitoring of this process strengthens its controls over third-party vendor selection. The vendor selection process involves due diligence that is tiered based on the level of risk to GSC. This includes vendor performance, availability, business continuity, regulatory environment, and data security and privacy (performed by Greystone's in-house IT). An approved vendor list is maintained and updated as necessary. In addition, periodic office visits to vendors are conducted. Vendors are replaced if the work is continually unacceptable or presents a conflict of interest. The vendor scorecard was most recently updated in 2023.

GSC, as special servicer, has a policy in place with respect to engaging affiliated or related-party vendors. They may be engaged to provide brokerage and/or other services on behalf of the trust for which GSC is the special servicer, provided such engagement is not prohibited by the terms of the applicable pooling and servicing agreement (PSA); such affiliate and/or related party has the expertise necessary to perform the services for which it is to be engaged; and the brokerage commission and/or other consideration for such services does not exceed the commission or other consideration that would have been earned by an independent party pursuant to an agreement entered into at arm's length. In addition, any engagement of any broker requires the approval of the senior managing director or the president of special servicing. GSC is generally prohibited from engaging CWK for appraisal services in connection with any mortgage loan and/or collateral for any mortgage loan for which GSC serves as the special servicer. In addition, GSC may engage CWK as a broker, property manager, or receiver provided it can demonstrate the expertise necessary to perform those services and that the compensation for such services does not exceed what would be earned by an independent party pursuant to an arm's-length agreement.

Insurance and legal proceedings

GSC has represented that its directors and officers insurance coverage, as well as its errors and omissions insurance, is in line with the requirements of its portfolio size. As of the date of this report, there were no material GSC servicing-related pending litigation items.

Loan Administration--Primary Servicing

The loan administration subranking is STRONG for commercial mortgage loan primary servicing.

GSC's primary emphasis is on the multifamily property type (see table 4). Since our prior review, the portfolio UPB increased to $71.7 billion as of Dec. 31, 2023, from $60.3 billion as of Dec. 31, 2021. This loan volume UPB increase of over 17% was fueled by increases in both the number of loans serviced and the average loan size. While having limited property type diversity, the portfolio continues to contain a wide geographic mix.

The servicing portfolio is concentrated among Fannie Mae, Freddie Mac, FHA, and Ginnie Mae investors (see table 5). Delinquencies totaling 1.6% as of Dec. 31, 2023, were distributed across the various investor loan portfolios (see table 6). Delinquencies totaling 1.9% as of Dec. 31, 2021, at the time of our prior review, were primarily in the balance sheet, Freddie Mac (non-K-Series), third-party investor, and CMBS loan portfolios. This was reflective of the effect of the COVID-19 pandemic on those portfolios based on their higher risk profiles.

Table 4

Table 5

Table 6

New loan boarding

Based on its stated practices and written procedures, GSC has a sound loan setup function that includes 12 dedicated staff. Control and other features for new loan setup include the following:

• Imported basic loan data is reviewed and verified by a loan administrator.
• A senior loan administrator reviews the initial loan setup for activation and approves generating the welcome letter and payment coupons.
• A review is done by the loan administration manager at completion of loan setup to confirm accuracy and that all relevant data has been retrieved from the loan documents.
• Pre-established defaults or templates have been implemented to minimize errors and maximize efficiency based on the loan program to which the new loan is tied.
• The company targets a maximum of eight days to board essential data so that it can process payments and conduct investor reporting.
• Loan boarding accuracy and timeliness metrics are formally tracked.
• Borrower welcome letters are issued within 10 days of loan closing or acquisition.

Payment processing

GSC's practices and integrated technology tools efficiently address payment processing and loan accounting activities with proper segregation of duties. Highlights of payment processing and loan accounting activities, which has 16 dedicated internal staff, include the following:

• GSC maintains an efficient platform that minimizes manual input by automating and leveraging its core servicing system.
• Funds are transferred from clearing to custodial accounts within one business day of posting to Benedict, and all custodial account balances are monitored daily.
• GSC periodically performs adjustable-rate mortgage (ARM) audits.
• As of Dec. 31, 2023, GSC reported a high level of automation of borrower payments; 99% of payments were received electronically either via automated clearing house (ACH)/electronic funds transfer, lockbox, wire transfer, or the Internet.
• Custodial bank accounts are maintained for each client/investor, are reconciled monthly, and require dual sign-off.
• As of Dec. 31, 2023, there were no unreconciled items within investor custodial accounts.

Investor reporting

GSC is highly experienced with government-sponsored entities as well as CLO investor reporting requirements. The company has 15 dedicated staff members for the various investor reporting and operational accounting activities that have good controls and are properly segregated for reporting, remitting, and related account reconciliation processes. Other highlights include:

• Investor reporting and accounting analysts are assigned workloads by investor or trustee/deal relationship.
• The Benedict servicing system is integrated with external banking software to facilitate outgoing investor wires, and custodial balances are monitored daily by the custodial accounting area.
• Investor custodial bank accounts are maintained for each client/investor, are reconciled monthly, and require dual sign-off. Custodial accounting completes, reviews, and signs off on all custodial bank accounts.

Escrow administration

GSC has sound controls for escrow administration activities with dedicated teams for tax (seven employees) and insurance (29 employees) administration. Asset managers handle loan-level reserve monitoring and analysis for other escrowed events such as repair and replacement reserves. Other features include the following:

• Third-party vendors handle taxes on escrowed loans, and escrowed real estate taxes are remitted no later than the delinquency date. For non-escrowed loans, third-party vendors perform tax searches and report unpaid taxes to GSC.
• GSC must advance for real estate taxes, insurance, and assessments due when there are insufficient funds in escrow. Amounts are billed to the borrower, and collection efforts are initiated and/or a new escrow analysis is provided to the borrower.
• Third-party vendors are utilized for insurance pre-closing review.
• As of Dec. 31, 2023, 80% of the company's loans are escrowed for real estate taxes, and 64% of the company's loans are escrowed for insurance.
• Force-placed policies allow for a 120-day look-back period for property insurance and 45 days for flood insurance. There were 30 loans on force-placed coverage as of Dec. 31, 2023.

Asset and portfolio administration

GSC has efficient procedures covering asset and portfolio administration tasks that facilitate deep knowledge and familiarity with customer needs. Overall, procedures for these functions are properly managed with effective automation tools. Other notable features include:

• The company has structured its asset management function into the following six teams to address different requirements amid the highly specialized nature of its portfolio:

1) Surveillance: Responsible for monitoring the risk profile for the Fannie Mae, Freddie Mac, pension fund, and life company portfolios. Surveillance asset managers serve as the point of contact for trustees, bondholders, borrowers, operators, and agencies.

2) Consents: Receives and processes post-closing requests for lender consent.

3) Property inspections and property financials: Ensures post-closing property inspections are performed, reviewed, and submitted according to servicing agreements; collects, normalizes, and submits borrower financial statements.

4) Reserve administration: Receives and processes requests for disbursement from replacement reserve and required repair reserves.

5) Portfolio analytics: Develops and distributes reports on the portfolio to GSC's investor and internal customers.

6) Resource team: Spreads and analyzes monthly, quarterly, and annual financial statements and rent rolls; assists with the quality control review of inspections; and performs low risk property site inspections. The team uses a proprietary risk rating model to analyze financial statements of FHA and USDA loans.

• The servicing systems and workflow applications track open items.
• In addition to the standard CRE Finance Council (CREFC) watchlist, GSC maintains other specific client-driven watchlists. As of Dec. 31, 2023, 6% of the portfolio was on the CREFC watchlist, and 8% was on the internal watchlist.
• GSC reported that it had received and analyzed 98% of the prior year-end property operating statements by Dec. 31, 2023.
• Asset managers perform property inspections on Fannie Mae and USDA loans that are listed on GSC's watchlist. Third-party vendors perform all other property inspections, including FHA loans that are outsourced to an approved U.S. Department of Housing and Urban Development (HUD) subcontractor.
• UCCs are tracked through an online system, and refilings are handled internally. As of Dec. 31, 2023, the portfolio had 6,372 filings, with one lapsed filing reported. No loss was incurred, and the UCC was filed immediately upon discovery.

Borrower requests

GSC addresses borrower requests in a well-controlled manner. Highlights are as follows:

• A workflow application facilitates the review of borrower requests requiring lender/third-party consent.
• Asset managers review borrower requests and perform the necessary due diligence to determine if the event is allowable within the loan documents.
• GSC's customer care functional area provides borrowers with a centralized contact and handles certain borrower requests, including ACH setup, contact changes, and mortgage verification.

In 2023, GSC processed 853 borrower consent requests with an aggregate UPB of approximately $11.7 billion in the role of primary servicer. In 2022, GSC processed 796 borrower consent requests with an aggregate UPB of approximately $9.8 billion in the role of primary servicer. By percentage, request actions were as follows:

Table 7

Early-stage collections

GSC's approach to handle early-stage collections varies by investor type. Noteworthy features per investor type are outlined below.

FHA, USDA, and non-agency investors:

• An electronic default loan file is created for loans 30 days past due.
• Asset managers start a dialog with the borrower to determine what specific events or combination of events are causing the current delinquency, to assist the borrower in addressing problems, and to develop a viable workout plan, if applicable.
• A committee meets monthly to discuss workout strategies.
• Quarterly calls are scheduled with HUD to discuss watchlist loans and workout options.

FM investors:

• A portfolio review meeting is hosted 10 times per year. At least six of these meetings include a discussion of GSC- and investor-watchlist-rated loans where risk themes and mitigation strategies are discussed.
• Asset managers attempt to contact the borrower or its designated agent to emphasize the necessity of receiving payment and to request pertinent information, which may include the reason for the delinquency, when the payment is anticipated, delivery method of payment, likelihood of future delinquencies, and the willingness of the borrower to provide an alternate source of funds if payment is not made by the end of the month.
• Asset managers take a more conservative approach than required by GSC's investor clients in assessing credit risk, using the debt service coverage ratio and deferred maintenance items, among other items, in risk-rating the loans.
• Loans that become 30 days delinquent are considered for transfer to the loss mitigation and special servicing department.
• In addition, GSC's FM loss mitigation and special servicing department works closely with Fannie Mae and Freddie Mac to resolve and minimize losses from both monetary and nonmonetary defaults.
• GSC provides assistance to Fannie Mae's and Freddie Mac's counsel in preparing legal notices, and the company participates in negotiations with the borrower for loans in monetary default.

CRE-CLO portfolio and third-party investors:

• Asset managers monitor delinquency reports daily during the payment cycle.
• Asset managers reach out to the established property/borrower contacts via email at the expiration of the grace period to determine if the payment is expected/in transit or if there may be a credit issue on the asset.
• The noteholder or special servicer is kept informed of payment collection efforts on assets where the payment is not expected during the then current collection period.

Loan Administration--Special Servicing

The loan administration subranking is STRONG for commercial mortgage loan special servicing.

As of Dec. 31, 2023, GSC is named special servicer on 48 CMBS deals containing 1,256 loans with a UPB of $21.5 billion, 15 Freddie Mac securitized deals containing 723 loans with a UPB of $3.9 billion, and five CRE-CLO deals containing 69 loans with a UPB of $2.1 billion. As of Dec. 31, 2023, GSC actively managed $969.2 million that included 25 loans ($750.6 million UPB) and eight REO assets ($218.6 million UPB), including two loans and five REO assets from transactions originated prior to the GFC.

GSC has a well-controlled asset recovery process that adheres to servicing standards, PSA requirements, and its corporate governance policies to avoid conflicts of interest. Asset resolution plans demonstrate alternative courses of action and utilize net present value (NPV) analysis. Since its inception in 2002 and through Dec. 31, 2023, GSC (and its predecessors) has resolved over 6,000 assets, including all asset types of income-producing properties, with an aggregate principal balance of over $59 billion.

As noted earlier, GSC is led by a president with two direct reports responsible for special servicing/asset management and business development/strategic relationships. GSC is organized among the special servicing (includes asset management, loan workouts, and REO dispositions); portfolio oversight (includes investor reporting, surveillance, borrower consents/requests, and tax and insurance administration); finance/due diligence; accounting; and legal functions.

As of Dec. 31, 2023, the company reported eight asset managers that have responsibility for both loan and REO assets. Asset managers averaged 30 years of industry experience and 12 years of company tenure as of Dec. 31, 2023. The ratio of assets to asset managers of approximately four (on average) is among the lowest of its peers and suggests there's capacity to handle additional servicing transfers in 2024 without the need for external hires.

In 2022 and 2023, transfers to the active special servicing portfolio totaled 25 loans with a UPB of $630.7 million and eight REO assets with a UPB of $230.6 million. This was offset by 48 loans ($1.2 billion of UPB) that were resolved/transferred out of the loan portfolio. The REO portfolio declined by $353.3 million UPB during the period, driven by the disposition of 22 REO assets that were sold or transferred to another special servicer.

Table 8  |  View Expanded Table

The average age of the loan portfolio has increased slightly since our prior review, while at the same time, the average age of the active REO portfolio has modestly trended down.

As of Dec. 31, 2023, GSC's average holding period of active loans was 21.1 months, which is generally comparable to that of similarly ranked peers. As of the same date, GSC's average holding period of active REO assets was 66.4 months, which is considerably lengthier than the average of its similarly ranked peers. We believe this is attributable to a portfolio more heavily weighted to assets that were originated prior to the GFC.

Loan recovery and foreclosure management

GSC has properly controlled loan workout and foreclosure management processes. The highlights are discussed below.

• A pre-negotiation letter is required before entering discussions with a borrower. To reduce loss exposure to the noteholder and maintain leverage in the negotiations with the borrower (if a realistic resolution cannot be achieved within 60 days) on a defaulted loan, a dual-track approach is taken, allowing the asset manager to pursue legal remedies while simultaneously negotiating with the borrower.
• Asset managers use LoanSStar Platinum to complete a checklist and assemble documentation around the status of the loan, including the loan file, inspection reports, rent rolls, financial statements, insurance, guarantors, and updated valuations.
• Loan asset managers re-underwrite the loan within 30 days of transfer and develop an initial resolution strategy, including establishing a legal budget and reviewing potential springing hard lockboxes and breaches of representations and warranties. Resolution plans are based on NPV alternative strategies, detailing the property and current market conditions, and they are presented to weekly credit committees according to a delegation of authority document.

Average resolution periods reached a multi-year high of 25.4 months in 2023 (see table 9), even accounting for the low levels in 2020 and 2021 due to the prevalence of COVID-19-driven loan workouts that returned to the master servicer. Three of the 2023 resolutions were hospitality properties. Two involved forbearance agreements that were extended before ultimate resolution, and one involved the death of the sponsor and a request for modification before being ultimately paid in full through refinance.

Table 9  |  View Expanded Table

GSC maintains resolution plans on LoanSSTAR Platinum, which tracks workflow for each item associated with the workout process, including approvals, timelines, and expenses. The system also tracks advances for recoverability testing and supports CMBS investor reporting to the trustee for problem loans and REO assets. Senior management reviews advancing levels and recoverability analyses monthly and communicates relevant advancing information to master servicers.

In the case of a foreclosure recommendation, the plan will include environmental and appraisal analyses. A foreclosure bid price is determined and tracked through LoanSStar Platinum.

REO management and disposition

GSC handles REO asset management and sales under a disciplined process. Loan asset managers also handle REO asset management activity, although one asset manager is dedicated to REO sales.

Since 2019, REO sales have totaled 186 properties for over $1.6 billion in aggregate gross proceeds that have consistently exceeded the servicer's estimates of market value (see table 10). The average REO hold period for GSC's sales activity declined substantially to 22.7 months in 2023 compared to 2022 when GSC reported a multi-year high level of nearly 36.8 months. Management noted that sales in 2022 were skewed by the adverse selection of assets that remained from the GFC.

Table 10  |  View Expanded Table

Transfers of loans to REO, as well as REO asset management and oversight, include the following protocols:

• The loan asset manager completes a pre-foreclosure checklist to ensure all required issues associated with taking title (property manager engaged, environmental reviews completed, property insurance coverage established, etc.) are completed before foreclosure.
• Within 90 days of taking title, the assigned REO asset manager, working in collaboration with the property management company, completes a 12-month operating and capital repairs property budget and business plan (assessing the property's operating performance, physical condition, and projected financial performance), and obtains approval per the special servicing delegation of authority.
• GSC attempts to market and sell any REO asset as soon as is reasonably practicable and in accordance with the applicable PSA. Therefore, as part of the initial analysis, GSC determines to either hold the asset for further stabilization or market the property for sale, at which time it establishes the estimated minimum sales price and timing, subject to approval per the special servicing delegation of authority. This determination is reviewed every 90 days, if approved.
• Upon the approval of a sale recommendation, GSC's REO sales group customarily engages a broker to market the property. Brokers are selected from an approved qualified vendor list maintained in LoanSSTAR, taking into account the property type, size, market area, and marketing strategy.
• Generally, GSC will consider multiple brokers from which it will make a selection based on expertise and cost. CWK may be considered as a broker for a property for which GSC is the named special servicer in the same manner that other brokers are considered with no mandate or preferential treatment. In accordance with GSC policy, CWK may be selected if such selection is not otherwise prohibited under the applicable PSA and CWK has the requisite expertise and coverage of the applicable location, the commission to be paid is not in excess of what would be earned by other non-related brokers, and the terms are otherwise no less favorable.
• LoanSStar Platinum tracks all activities including workflow timelines, approvals, property income, and expenses.
• An REO committee meets weekly to review and approve actions in accordance with the GSC approval authority policy.
• All recommended sales offers require approval through a formal committee process.

REO accounting and reporting

GSC has a properly controlled REO accounting function. The company's special servicing operations department establishes the REO operating accounts and maintains monthly records of receipts and disbursements.

Dual bank accounts are established, and the property manager submits monthly reports to REO management. GSC relies on asset managers to reconcile property management REO bank accounts. For further engagement and quality assurance, GSC conducts routine property management audits, of which it completed six in 2023 and 10 in 2022. In addition, external auditors perform cash audits of property managers twice annually. Based on the results of the cash controls assessments, GSC has decided in some instances to discontinue using certain property management firms. We have observed that GSC's audit practices of its REO property managers are more extensive than those of most servicers we rank.

Subcontracting management

GSC engages certain vendors for ancillary services and reports, such as appraisers, brokers, property managers, environmental engineers, appraisal reviewers, and legal counsel. Notable features include:

• GSC monitors vendor management and performance within the LoanSSTAR Platinum application and maintains approved vendor lists within the application for appraisers, property inspectors, brokers, property managers, environmental engineers, and attorneys.
• Other than law firms, a new vendor can be added to the approved list when a vendor registration form is completed, wherein the vendor confirms its insurance and bond coverage, its indemnification of GSC, its status as an independent contractor, and its agreement to confidentiality terms.
• LoanSSTAR Platinum tracks approvals, engagement letters, invoices, and payments. Asset managers can assess a vendor's or contractor's performance on each assignment with performance and delivery ratings in LoanSSTAR, which can then be reviewed by asset managers when considering engagement for other assignments.

Performing loan surveillance

The CMBS surveillance area, managed by the managing director of portfolio oversight, provides special servicing with an early warning of potential incoming transfers, facilitating staffing plans and other related activities affecting special servicing operations. The group has regular dialogue and information exchanges with master servicers and monitors master servicers and trustee reports at the loan level through the LoanSSTAR application to assess emerging problems.

In addition, LoanSSTAR tracks CMBS property-level performance data, including historical financial statements, rent rolls, and inspections. System reports provide automated watchlist inclusion based on PSA and servicing loan agreement trigger events (debt service coverage ratio, vacancy, and maturity date) or manual flags (inspection issues).

The portfolio oversight and special servicing groups also conduct periodic conference calls with master servicers to discuss delinquencies; watchlist loans; properties impacted by disasters; insurance deficiencies; tenant and/or borrower bankruptcies; pending assumptions, modifications, waivers, or consent matters; loan or collateral activity associated with the top 10 assets in a transaction; the status of hospitality loans maturing within the next six months; and any other loans or properties with performance issues.

The managing director of portfolio oversight is also responsible for the investor reporting function, which includes investor reporting and special servicing operations, with a team of eight staff members. The portfolio oversight section uses LoanSSTAR to review investor reports. These reports are uploaded from trustee websites and reviewed for accuracy and completeness. Electronic CREFC file uploads are provided to master servicers. For CMBS special servicing, the LoanSSTAR system provides automated mechanisms for tracking and analyzing advances and recoverability, allowing for strong monitoring.

Borrower requests

The company reports that two special servicing asset managers handle borrower consent activity. Workload tools track requests from primary/master servicers, and the approval process follows appropriate delegations of authority procedures and/or committee approval.

In 2023, GSC processed 86 borrower consent requests with an aggregate UPB of approximately $2.7 billion in the role of special servicer. In 2022, GSC processed 62 borrower consent requests with an aggregate UPB of approximately $2.1 billion in the role of special servicer. By percentage, request actions were as follows:

Table 11

Legal department

The legal function is well controlled. GSC's special servicing operations are supported by a legal department that includes a general counsel who oversees two attorneys, a paralegal, and an employee dedicated to compliance. This legal department maintains the approved list of outside counsel and will modify the list based on periodic assessments. Internal counsel is assigned to each newly transferred specially serviced asset. The attorneys work with senior management, asset managers, and outside counsel with respect to all aspects of asset resolution, including providing litigation support, counsel on strategy, and PSA and real estate mortgage investment conduit (REMIC) compliance issues.

Law firms are engaged directly by GSC for the purpose of advising and providing legal services related to the enforcement of the rights and remedies of the respective trusts with respect to the loans GSC services. GSC's general counsel maintains approval authority over the use of law firms engaged by GSC.

GSC uses standard engagement letters, and the assigned asset manager must review legal invoices before making payment. The legal department tracks matters and litigation and monitors and directs all matters that name GSC as a defendant. GSC's legal department provides oversight with its research, interpretation, and administration of PSAs or other governing document requirements. The legal department abstracts new deals, maintains and updates PSAs and operating adviser and controlling class matrices, and ensures critical special servicing requirements are highlighted, summarized, and entered in LoanSSTAR Platinum. The LegalSSTar proprietary application is used by the legal department to track specially serviced loans, monitor litigation matters and budgets. In addition, the legal department oversees GSC's electronic document library for PSAs/governing documents.

Financial Position

The financial position is SUFFICIENT.

Related Research

• Select Servicer List, Jan. 22, 2024
• Full Analysis: Greystone Select Financial LLC, Nov. 9, 2023
• Research Update: Greystone Select Financial LLC Outlook Revised To Stable From Positive On Lower Origination Volumes; 'B' Rating Affirmed, July 11, 2023
• Servicer Evaluation: Greystone Servicing Co. LLC, April 15, 2022
• Servicer Category Descriptions Expanded and Revised, Feb. 28, 2022
• Analytical Approach: Global Servicer Evaluations Rankings, Jan. 7, 2019