Ranking overview
		Subrankings
Servicing category	Overall ranking	Management and organization	Loan administration	Ranking outlook
Commercial mortgage loan primary	ABOVE AVERAGE	ABOVE AVERAGE	ABOVE AVERAGE	Stable
Commercial mortgage loan master	ABOVE AVERAGE	ABOVE AVERAGE	ABOVE AVERAGE	Stable
Commercial mortgage loan special	ABOVE AVERAGE	ABOVE AVERAGE	ABOVE AVERAGE	Stable
Financial position
SUFFICIENT

Rationale

S&P Global Ratings' rankings on First National Financial L.P. (FNF) are ABOVE AVERAGE as a commercial mortgage loan primary, master, and special servicer. On Sept. 20, 2024, we affirmed the rankings (please see "First National Financial L.P. ABOVE AVERAGE Commercial Mortgage Primary, Master, And Special Servicer Rankings Affirmed," published Sept. 20, 2024). The ranking outlook is stable for each ranking.

Our rankings reflect FNF's:

• Experienced management team and staff, with good overall tenure, albeit with somewhat greater turnover rates than average for primary servicing staff;
• Sound internal audit program;
• Detailed policies and procedures, which are reviewed and updated annually;
• Solid technology and systems environment;
• Investment in technology to automate processes that increase efficiencies and controls;
• Portfolio of property and investor types that are limited in diversity and are primarily focused on multifamily loans; and
• Well-designed default management control environment, albeit with limited delinquency volume in the primary and special serviced portfolios, which limits our ability to fully assess their loan workout capabilities.

Since our prior review (see "Servicer Evaluation: First National Financial L.P.," published Oct. 12, 2022), the following changes and/or developments have occurred:

• The primary serviced portfolio loan count has experienced growth of 5.2% since our last review, but the overall unpaid principal balance (UPB) has increased to C$52.4 billion from C$39.1 billion due to a significantly larger average loan size.
• FNF serves as the master servicer on 136 loans totaling C$972.8 million in UPB as of June 30, 2024, which is a slight decrease from the 189 loans and C$1.5 billion at our last review.
• A director and a team lead were added to the commercial group. Two people left the team, with one retiring and the other transferring into originations. Five employees from servicing left the company, with an additional two transferring into other departments.
• The surveillance team was moved into the loan enforcement team (special servicing) for better alignment of duties.
• Management leadership titles on the commercial team were upgraded to better align with the overall commercial industry and to be more descriptive of their duties within the company.
• The company recently transitioned to more modern software for calls, giving employees better flexibility on calls and chats with borrowers.
• The company started using Power BI for project needs to automate processes and refine the existing reporting, providing better detail and flexibility.

The ranking outlook is stable for each of the rankings. We expect that FNF will continue to effectively manage their loan portfolio, which mainly comprises multifamily collateral. They continue to focus on updating systems and adding additional policies and procedures, which should further enhance their control environment. The commercial mortgage loan delinquencies have continued to be low, with minimal payment deferrals granted to borrowers. While the company has limited specially serviced loans and no real estate owned assets in their special servicing at this time, it does have experienced personnel to handle a modest increase in defaulted assets, along with the appropriate controls in place should the need arise.

In addition to an on-site meeting with servicing management, our review included current and historical Servicer Evaluation Analytical Methodology data through June 30, 2024, as well as other supporting documentation provided by the company.

Profile

Servicer profile
Servicer name	First National Financial L.P.
Primary servicing location	Toronto
Parent holding company	First National Financial Corp.
Loan servicing system	Optimus v. R4.5

FNF was founded in 1988 as a mortgage company, to originate and service residential mortgage loans. It started offering and servicing multifamily residential and commercial mortgage loans in 1990, including construction lending for single-family tract, multifamily, and condominium developments. The original principal partners remain active in the company. The parent company of FNF, First National Financial Corp., is a Canadian originator, underwriter, and servicer of predominantly prime residential (single-family and multifamily) and commercial mortgage loans.

With almost C$144 billion in mortgage loans under administration as of year-end 2023, FNF is one of Canada's largest nonbank mortgage originator and underwriter and is among the top three in the Canadian mortgage broker market. It also performs white label servicing for others. FNF is an approved lender for mortgage loans insured by the Canada Mortgage and Housing Corp. (CMHC), with origination offices in Toronto; Montreal; Vancouver; Halifax, Nova Scotia; and Calgary, Alberta. The company originates loans in all 10 Canadian provinces and three territories. FNF's headquarters and centralized servicing operations are in Toronto. The company's customer service center in Montreal also assists French-speaking borrowers.

The investors for FNF's primary servicing commercial portfolio are centered around banks and financial institutions, which comprise 67.6% of UPB as of June 30, 2024 (see table 4). The master serviced loan portfolio has shrunk since our prior review, with current values of C$973 million UPB as of June 30, 2024, down from C$1.5 billion as of June 30, 2022. The special servicing portfolio currently has a small number of assets (50 loans totaling C$230 million; 12 of those assets account for C$61 million in default) and has had no resolution activity since our last report. Nonetheless, FNF is presently the named special servicer on 125 loans with a UPB of approximately C$906 million.

Table 1

Total servicing portfolio
	UPB (mil. C$)	YOY change (%)(i)	No. of assets	YOY change (%)(i)	No. of staff	YOY change (%)(i)
Primary/master servicing
June 30, 2024	53,333.0	8.8	5,918	1.1	38	5.6
Dec. 31, 2023	48,999.6	15.5	5,853	2.2	36	20.0
Dec. 31, 2022	42,410.1	8.7	5,726	0.4	30	(6.3)
Dec. 31, 2021	39,011.3	11.1	5,704	1.2	32	35.6
Dec. 31, 2020	35,122.6	14.6	5,635	1	24	27.0
Special servicing
June 30, 2024	230.4	28.7	50	35.1	7	0.0
Dec. 31, 2023	179.0	N/A	37	N/A	7	40.0
Dec. 31, 2022	0.0	0.0	0	0.0	5	25.0
Dec. 31, 2021	0.0	0.0	0	0.0	4	0.0
Dec. 31, 2020	0.0	0.0	0	0.0	4	(33.3)
(i)June 30, 2024, YOY change based on the prior year end. YOY--Year-over-year. UPB--Unpaid principal balance. N/A--Not applicable.

Table 2

Portfolio overview
	June 30, 2024		Dec. 31, 2023		Dec. 31, 2022		Dec. 31, 2021		Dec. 31, 2020
	UPB (mil. C$)	No.	UPB (mil. C$)	No.	UPB (mil. C$)	No.	UPB (mil. C$)	No.	UPB (mil. C$)	No.
Primary loans	52,360.2	5,782	47,951.5	5,701	41,301.6	5,563	37,413.2	5,497	33,405.4	5,411
Master (SBO) loans	972.8	136	1,048.2	152	1,108.5	163	1,598.1	207	1,717.2	224
Total servicing	53,333.0	5,918	48,999.6	5,853	42,410.1	5,726	39,011.3	5,704	35,122.6	5,635
Average loan size	9.0	0	8.4	0	7.4	0	6.8	0	6.2	0
Special servicing
Loans	230.4	50	179.0	37	0.0	0	0.0	0	0.0	0
REO properties	0.0	0	0.0	0	0.0	0	0.0	0	0.0	0
Total special servicing	230.4	50	179.0	37	0.0	0	0.0	0	0.0	0
Note: Totals may not add due to rounding. UPB--Unpaid principal balance. SBO--Serviced by others. REO--Real estate owned.

Table 3

Primary/master portfolio breakdown by property type and province(i)
	UPB (mil. C$)	UPB (%)	No. of properties	Properties (%)
Type
Multifamily	50,654.2	95.0	5,597	94.6
Industrial	1,232.6	2.3	114	1.9
Retail	787.7	1.5	113	1.9
Office	366.4	0.7	39	0.7
Health care	38.8	0.1	10	0.2
All others	253.3	0.5	45	0.8
Total	53,333.0	100.0	5,918	100.0
Province
Ontario	28,197.7	52.9	2,834	47.9
Quebec	8,695.6	16.3	1,330	22.5
British Columbia	6,531.7	12.2	567	9.6
Alberta	4,729.1	8.9	422	7.1
Nova Scotia	2,842.5	5.3	326	5.5
All others	2,336.4	4.4	439	7.4
Total	53,333.0	100.0	5,918	100.0
Note: Totals may not add due to rounding. (i)As of June 30, 2024. UPB--Unpaid principal balance.

Table 4

Primary/master portfolio by investor product type(i)
Loan type	UPB (mil. C$)	UPB (%)	Loan count	Loan (%)
Banks/financial institutions	36,038.1	67.6	3,953	66.8
Contained in a CRE CDO/CRE CLO (whole loan, mezzanine, B note)	10,927.1	20.5	1,251	21.1
On own or parent's balance sheet (exclude issued CRE CDO/CRE CLO)	2,126.1	4.0	246	4.2
Other third-party investors (REITs, investment funds, etc.)	2,082.4	3.9	209	3.5
CMBS/CDO/ABS	1,048.5	2.0	148	2.5
Pension funds	660.1	1.2	65	1.1
Life insurance companies	450.7	0.8	46	0.8
Total	53,333.0	100.0	5,918	100.0
Note: Totals may not add due to rounding. (i)As of June 30, 2024. UPB--Unpaid principal balance. CRE--Commercial real estate. CDO--Collateralized debt obligation. CLO--Collateralized loan obligation. REIT--Real estate investment trust. CMBS--Commercial Mortgage-backed securities. ABS--Asset-backed securities.

Management And Organization

The management and organization subrankings are ABOVE AVERAGE.

Organizational structure, staff, and turnover

The commercial mortgage loan servicing staff count has grown by 55% since our last review, increasing to 45 from 29; however, we observed both lower industry experience and company tenure as compared to similarly ranked peers. We also noted that in recent years, FNF's staff turnover was much greater than peers'. To help slow the exit of employees, FNF upgraded numerous employee's titles to bring them more in line with the industry and to make them more attractive to applicants.

FNF senior and middle management exhibit levels of company tenure and industry experience that are generally in line with similarly ranked peers. Given the overall tenure, training, and technology at FNF, the turnover seems manageable.

There are 38 staff members dedicated to the primary and master servicing of commercial mortgage loans, which is a 6% increase from 36 employees since June 2023. They have seven staff members assigned to special servicing who are cross-trained and sourced for other operational functions, given the current special servicing volumes. While the overall 29% combined year-end 2023 turnover is greater than in recent years, management stated they now have stabilized staffing and are adequately staffed. We note the combined turnover rate this year was 9% through June 30, 2024.

FNF's operations include the typical mortgage banking functions of originating and loan servicing. Additional corporate support is provided by First National Financial Corp., including human resources (manages payroll, benefits, and employee hiring), accounting (manages movement of funds and provides account reconciliations), audit/finance (ensures FNF's compliance with responsibilities to various stakeholders), and IT (provides solutions for efficient and effective ways to conduct business, in addition to general office and employee support).

The commercial operations group is headed by an executive vice president of commercial mortgages, who has been with the company for 20 years. He has three direct reports who cover business analysis, commercial operations, and commercial credit. Each of these department heads have additional staff reporting to them to handle the commercial mortgage loan business operations. Since our prior review, FNF has also moved to a hybrid work environment and established an annual corporate succession planning process.

Table 5

Years of industry experience/company tenure(i)
	Senior managers(ii)		Middle managers		Asset managers		Staff
	Industry experience	Company tenure	Industry experience	Company tenure	Industry experience	Company tenure	Industry experience	Company tenure
Primary	28	13	19	7	N/A	N/A	4	2
Master	28	13	17	17	N/A	N/A	14	11
Special	28	13	26	10	23	11	22	12
(i)As of June 30, 2024. (ii)Senior managers cover primary, master, and special servicing. N/A--Not applicable.

Training

FNF has a comprehensive training and staff development program. Companywide, there are 20 people in the training group, an increase of seven since our previous review, divided into residential underwriting, residential servicing, commercial, and an operations group, which includes an instructional designer. Training features include:

• Commercial servicing employees are required to complete a minimum of 14 training hours. Management reported that the primary, master, and special servicing teams averaged four, four, and five hours, respectively, through the first half of 2024.
• The majority of job-specific training is developed internally using a training design model that incorporates analysis, design, development, implementation, and evaluation.
• Evaluation surveys are sent to participants.
• A course maintenance schedule is in place to ensure content is accurate and up to date.
• Various delivery methods are used for training, including classroom, virtual, and e-learning.
• A centralized training hub was created since our prior review to consolidate training and reference material for learners.
• The company moved to a new learning management platform in early 2023 that is used to track training and also houses soft-skill and developmental programs that are available to staff on demand.
• The new-hire training curriculum is comprehensive, including orientation, role-specific, and compliance courses.
• FNF has a learning partner program, also established since our prior review, where business unit subject matter experts work with the training team to develop training resource material.
• There is a management training curriculum for current managers and for staff members who are interested in moving to a managerial role.
• Training and development plans are established for high-potential and high-performance employees.
• Job shadowing and temporary transfers are part of FNF's cross-training initiatives available to staff.

Systems and technology

FNF has effective technology to meet its commercial servicing requirements. The company continues to focus on technology enhancement projects to further streamline and automate servicing tasks across various loan administration functions. It has data backup routines and disaster recovery preparedness. Over the past four years, FNF has restructured and built out its technology group, increasing its size to 200 people from 70 in 2020.

Servicing system applications

FNF uses a proprietary origination system, Merlin, that automatically transfers loans to Optimus, the main servicing system for both commercial and residential mortgage loans. Optimus (a MCAP Solutions Corp. product) has been the main servicing system for both residential and commercial mortgage loans since 2001. FNF utilizes version R4.5 of Optimus, which runs on an AS400/DB2 platform and interfaces with FNF's general ledger. Other notable features include:

• An investor portal provides portfolio-, asset-, and property-level information to assess pool and loan performance.
• The Microsoft Power BI tool generates dynamic reports, including data visualization.
• DocuSign is used companywide for internal signatures and approvals to keep workflows moving in the case of remote employees. It is also used to facilitate renewals in residential servicing.
• The servicing workflow system, which was developed internally by the FNF IT department to manage and monitor workflows within the servicing departments, has been used in residential servicing since November 2021, and the first phase of the commercial workflow was implemented in early 2024.
• FNF's data processing operations are sufficiently automated and staffed. FNF has a default management risk-analysis screen to help facilitate reporting to investors and loan insurers.

Business continuity and disaster recovery

FNF's disaster recovery and business resumption plan is sufficiently detailed and includes the following features:

• FNF performs a test of its recover plan annually. There were no material issues identified during the most recent full test, conducted on April 6, 2024.
• FNF's data backup sites are in Markham and Mississauga, Ontario, which are each less than 30 kilometers away from the home office. Having backup locations this close to the central location is not a best practice; however, they are on a separate power grid from Toronto and from each other.
• FNF has an agreement with a major systems supplier to provide an emergency operations center (EOC). This EOC has seating for 50 employees, 24 hours a day, for a minimum of two weeks.
• Employees can also work remotely, which is the primary business continuity response.
• All core systems are replicated in real time.
• There are daily backups to the disaster recovery site and to tape, which is archived at an offsite location.
• We consider the recovery time point objective to be sound for systems and applications the company considers critical.

Cyber security

FNF has IT staff and procedures dedicated to cyber security and its information security program. Program highlights include:

• There is a defined incident response plan in the event of a security breach that includes measures to close any gaps and prevent future issues. The plan is reviewed annually.
• Tabletop exercises testing for both technical and non-technical responses are performed annually.
• IT generates and monitors user network and application password updates, and managers review and validate user access semiannually.
• FNF uses a third-party security operations center to monitor network intrusions and to identify suspicious or malicious activity in real time.
• Penetration tests are performed annually by a third party. The most recent test, completed on Oct. 3, 2023, did not identify any material issues.
• System patches and routines are applied based on the criticality of any identified vulnerabilities, with critical patches being deployed within seven days.
• Daily vulnerability scans of both internal and external devices and websites are performed.
• The company has a standalone cyber security insurance policy and access to a cyber security attorney as needed.
• The company's IT department works closely with internal legal counsel and audit teams to ensure they are taking necessary precautions to protect access to the borrowers' personal information and are adhering to all applicable laws and requirements.
• Phishing simulation tests are performed quarterly.
• All employees are required to complete annual training courses related to information privacy and security, including online cyber security courses, social engineering, and email security training.

Despite servicers' expenditures on cyber security staff and systems to support their programs, these preventative measures are only effective if the program is successfully implemented and maintained. Notwithstanding, even the best preventative measures will be continuously challenged by the ever-increasing sophistication of attacks.

Internal Controls

FNF's internal audit function, coupled with external audits, are designed to mitigate risk and monitor compliance with its own servicing standards, investor requirements, and those of the mortgage insurers (CMHC, Genworth Financial, and Canada Guaranty), based on its portfolio composition. The risk oversight module of its internal audit management system was implemented in July 2024. This module will be used to identify risks and their associated controls.

Policies and procedures

FNF's policies and procedures (P&P) manuals include detailed process descriptions and adequately address critical areas of servicing. The manuals are available online and in hardcopy for all employees. A dedicated individual is responsible for managing the updates and provides them as needed. Senior managers review and approve all updates and suggested changes before they are implemented. P&P's are reviewed at least annually.

Letter templates are maintained in SharePoint by the business analyst (BA) team, who manage site access and archiving of retired communications. Requests for new letters follow standard change management processes, which include a review and approval by internal legal counsel and marketing. Department managers review their templates annually.

Compliance and quality control

FNF has a dedicated team to perform compliance and quality control testing and, in commercial servicing, it serves as its first line of defense. The team's responsibilities include reviewing loan setup and onboarding as well as reviewing details related to ongoing commercial mortgage loan servicing. The assistant manager of commercial quality assurance has a small group reporting to her, and this department serves as the first line of defense. As procedures are tested through the year, samples are reviewed to assess the effectiveness of the controls. Servicing management reports are reviewed, monitored, and validated, and if any issues are found, they are addressed with related management. FNF's in-house attorneys and managers are responsible for the change control process associated with any legislative changes.

FNF's second line of defense is compliance, which at the time of our last review reported to the chief financial officer (CFO) but now reports to the head of the risk management department. Compliance is responsible for establishing and maintaining compliance P&Ps to address regulatory requirements. It also partners with the legal department and BA team to manage regulatory change management.

FNF's compliance department monitors and performs sample testing of the work performed by the business units' first line of defense to assess the effectiveness of controls and also addresses privacy and anti-money laundering (AML) regulations. The AML testing is performed annually, while all other monitoring and validations are performed quarterly. This analysis is summarized and reported to executive management and the board. Although the scope and frequency of FNF's compliance testing are more limited than what we see with other mortgage servicers (who normally perform more frequent transactional testing focused on broader regulatory and investor requirements), this additional regulatory risk is partially mitigated by the internal and external audits performed.

Internal and external audits

FNF has an internal audit program that serves as their third line of defense. FNF's internal audit group, comprising three internal auditors, operates as a separate group within FNF and is led by the vice president of risk management and internal audit. The audits and reviews are designed to address and satisfy traditional risk assessments and performance methodologies through loan-level sampling to assess adherence to stated policy and servicing standards. Features of the audit function include the following:

• The internal audit group meets with division leaders to review operational risks and controls to determine an overall risk level for the auditable entities.
• Risk scores are used to develop the annual and three-year audit plans, which are reviewed and approved by the board.
• Internal audits are rated on a scale of conformance, major nonconformance, minor nonconformance, and opportunity for improvement.
• A new policy that requires a formal remediation plan for any area of nonconformance was implemented.
• Internal audit issues are reported quarterly to the board of directors and the audit committee.
• An audit management system was implemented in the fourth quarter of 2023.

FNF did not provide copies of the audits but did provide a summary of the audits performed and the status of the findings as well as the audit calendar for 2024. We also discussed each of the audits performed with the head of the internal audit department. There were no audits cited with a major nonconformance rating. The status of open remediation items did not show any items past due.

In addition to its internal audit process, FNF is subject to external audits by insurers and regulators. While we were not given access to these reports, management stated that there were no identified issues.

We reviewed FNF's 2023 Uniform Single Attestation Program, which noted no areas of noncompliance.

The Canadian Standard on Assurance Engagements 3416 Report assessing the period from Oct. 1, 2022, through Sept. 30, 2023, which covers both commercial and residential servicing, contained four deviations, none of which were considered material and all of which had compensating controls cited.

Vendor management

FNF vendors are managed at the operational level by the business units, while the legal department manages vendor contract review and renewal. A vendor management committee, comprising technology, information security, legal, compliance, and privacy, is responsible for the program oversight and management.

FNF implemented a vendor risk platform in the second quarter of 2023. The platform is used as the central database and repository for vendor documents, risk assessments, remediation plans, scorecards, and results. The system includes workflow and reporting functionality.

Vendor management program highlights include:

• The vendor management committee meets at least quarterly to discuss vendor effectiveness, protection of private information, timeliness, and other factors.
• A risk assessment is performed by the vendor management committee based on cyber, regulatory and compliance, privacy, reputational, financial, operational, and business continuity risks. This risk assessment determines the level of due diligence to be performed.
• Documents and questionnaire responses are used to perform due diligence on potential new vendors, those with materially changing scope, and at renewal.
• Vendor performance is monitored against service-level agreements and key performance indicators, although there is no specific cadence to these reviews.
• Identified issues with the vendor performance are required to have an action plan to remediate the issue.

Insurance and legal proceedings

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

Loan Administration--Commercial Mortgage Loan Primary Servicing

The loan administration subranking is ABOVE AVERAGE.

As of June 30, 2024, FNF was the primary servicer for a portfolio totaling C$52.4 billion. This is a 33.8% increase since our last review (using June 2022 data), continuing a trend of UPB growth. The average loan size continues to drive the increase, rising to C$9.1 million from C$7.1 million at the last review, while the loan count has remained relatively flat.

Although concentrated in Ontario based on the population demographics in Canada, FNF's commercial loan portfolio is diversified geographically, with 52.9% of the loan portfolio UPB located in Ontario, 16.3% in Quebec, 12.2% in British Columbia, 8.9% in Alberta, and 5.3% in Nova Scotia. The portfolio, however, has minimal diversity of property types, with approximately 95% (by UPB) of the portfolio concentrated in multifamily housing (see table 3), which is similar to other Canadian servicers we rank. The diversity by investor type is also modest, with an emphasis on banks/financial institutions (67.6% of UPB) and commercial real estate collateralized debt obligation (20.5% of UPB) (see table 4).

Delinquencies in the commercial servicing portfolio have remained nominal for the last several years and continue to remain quite low, at .07% of total UPB as of June 30, 2024.

Table 6

Primary servicing portfolio
	June 30, 2024		Dec. 31, 2023		Dec. 31, 2022		Dec. 31, 2021		Dec. 31, 2020
	UPB (mil. C$)	No.	UPB (mil. C$)	No.	UPB (mil. C$)	No.	UPB (mil. C$)	No.	UPB (mil. C$)	No.
Primary loans	52,360.2	5,782	47,951.5	5,701	41,301.6	5,563	37,413.2	5,497	33,405.4	5,411
Average loan size	9.1	--	8.4	--	7.4	--	6.8	--	6.2	--
Delinquent (%)
30 days	0.02		0.00		0.00		0.00		0.00
60 days	0.05		0.06		0.02		0.01		0.00
90+ days	0.00		0.01		0.00		0.00		0.00
Total	0.07		0.06		0.02		0.01		0.00
Note: Totals may not add due to rounding. UPB--Unpaid principal balance.

New-loan boarding

Based upon its practices and written procedures, FNF has a sound loan setup process, which has not undergone any recent changes. The funding and documentation group handles new-loan setup activities and processed 415 new loans into the system during the first half of 2024. Highlights include the following:

• A new-loan boarding staff member reviews all loan information recorded in the Optimus system before a transaction closes, as well as updates and reconciles all remaining data fields until the funding disbursement.
• A second employee within the funding area performs an additional review of all loan data for 100% document-to-system validation.
• Reminder dates are set up in the system for property insurance, taxes, inspections, financial statements, etc.
• New loans are targeted to have essential data into the system within five days.
• The Optimus system provides system-generated exception reports, which the commercial funding administrator and manager review.
• Borrower welcome letters are system-generated and issued within five business days of loan boarding by the servicing group. FNF formally tracks loan boarding accuracy and timeliness metrics.
• No trailing documents were outstanding on loans boarded more than six months ago.

Payment processing

FNF has dedicated staff to handle payment processing. The company's practices and integrated technology tools efficiently address payment processing and appropriate segregation of duties. Highlights of payment processing include:

• Of the payments received, 97% are through automated clearing house, electronic funds transfer, or pre-authorized checks and 3% are handled via wire transfers.
• All loan payments received are deposited and applied to the servicing system the same day. If the loan is part of a conduit pool, the monthly payments will flow through automatically to FNF's investor reporting sub-servicing system on Optimus.
• Optimus provides a daily automated interface with the general ledger's subledger accounts for tracking investor balances and escrowed funds.
• The finance and accounting area reconciles payment postings daily, along with monthly reconciliations of investor and escrow accounts.
• There are at least two signatures required for wire transfers or other payments.
• There was a nominal amount of funds over 90 days in aged suspense as of June 30, 2024.
• FNF has 239 adjustable-rate mortgage (ARM) loans as of June 30, 2024, which is a reduction of 48 loans since our prior review. Management does not report performing review audits on ARM loans. We view a periodic review of ARMs as a best practice. FNF has been working to inform borrowers of the impact SOFR will have on their ARMs, where applicable.

Investor reporting

FNF has dedicated staff members for various investor reporting and operational accounting activities. The staff members' duties are properly segregated for reporting, remitting, and account reconciliation. Controls of the processes include the following highlights:

• Optimus automatically generates reports to meet reporting requirements for securitized and balance sheet loans.
• The investor reporting group provides monthly remittances to the custodians of each pool.
• The group also delivers monthly Commercial Real Estate Finance Council (CREFC) reports to reporting agents for each pool serviced.
• The investor reporting manager reviews and approves all electronically delivered reports before submission.
• A separate finance and accounting area reconciles investor funds from each trust account before remittance.
• Remittances are processed primarily as electronic fund transfers, and all remittances require two levels of managerial approval before any disbursement can be made.
• There have been no commercial mortgage-backed securities (CMBS) remittance or reporting errors since our previous review.

Escrow administration

The company seems to have effective controls for managing escrow administration. The commercial tax payments are handled with residential taxes by the tax group; however, the commercial administration group continues to handle all client-facing borrower tax issues and property insurance matters. Other escrow features include the following:

• Upon loan closing, the funding area completes a comprehensive review of tax requirements and establishes appropriate data records on Optimus.
• Optimus generates standard disbursement reports for tax-escrowed accounts that are matched to applicable tax bills. Power BI is then used for reporting and verification.
• Optimus tracks tax due dates and payments, as well as insurance expiration dates and coverage limits. Commercial insurance policies are reviewed by a third-party vendor at loan funding and again at insurance renewals.
• Automated reminder letters requesting evidence of payment confirmation are issued for nonescrowed loans (property insurance is generally not escrowed in Canada).
• The tax group confirms coverage initially at loan closing and then throughout the loan term by collecting and reviewing policies to ensure adequate coverage remains in place.
• Insurance renewal letters are sent to borrowers 15 days before policy expiration, which is a shorter notice period than is used by most other ranked servicers.
• The company has a force-placed insurance policy, which provides for a 30-day look-back period. As of June 30, 2024, there were just nine loans (less than 0.2% by UPB of the overall portfolio) added to this force-placed policy. FNF requires escrowed insurance payments for borrowers on the force-placed policy, as they were unable to secure their own insurance for the property.
• Release of any escrow funds must be reviewed and approved by a manager and are made through the servicing system.

Asset and portfolio administration

FNF has documented procedures covering asset and portfolio administration tasks. They have separate dedicated personnel within the commercial administration group who handle portfolio compliance, documentation, financial statements, and reporting. Notable features include:

• Personal Property Security Act (PPSA) registrations are managed by an outside vendor who files the resubmissions with the respective jurisdiction. Servicing management and staff review system reports to verify that all PPSA registrations are handled timely. FNF reported no expired PPSA registrations during the six-month period ending June 30, 2024.
• FNF has defined procedures that support property inspections, financial statement collection and analysis, servicing agreement compliance, credit reviews, and watchlist reporting.
• Loans are reviewed monthly by the senior vice president (SVP) of commercial mortgage and asset management to determine any loans that will be included on the watchlist based on certain criteria, such as changes to occupancy, declines in property condition, and changes in debt service coverage ratios, among other issues.
• Property financial statements are obtained at least annually and normalized using CREFC reporting standards.
• Nonsecuritized loans are handled in a similar fashion to securitized loans, based on individual investor requirements.
• As of June 30, 2024, FNF had collected 68% of fiscal year-end 2023 operating statements for the total portfolio, which is typical for this time of the season. As of Dec. 31, 2023, FNF had collected 92% of fiscal year-end 2022 operating statements for the total portfolio.
• Of the total year-end 2023 property operating statements, 93% had been collected and analyzed for the CMBS portfolio as of Dec. 31, 2023. As of June 30, 2024, 77% of all CMBS prior-year-end property operating statements had been collected and analyzed.
• The majority of required CMBS property inspections are completed by a vendor. Management stated they felt it was not necessary, nor is it required to inspect properties in the remainder of the portfolio unless they are transferred to special servicing.
• Deferred maintenance items for CMBS loans are tracked in Optimus, and related letters are sent to borrowers regarding required repairs.
• Property statements and inspections are tracked and automated through Optimus, and copies of the inspection reports are imaged into the system.

Borrower requests

FNF addresses borrower requests in a well-controlled manner. Through first-half 2024, FNF processed 52 borrower requests, with nine easements, six management changes, three maturity extensions, three partial property/collateral releases, and 31 other requests. Highlights include:

• All borrower requests are handled in-house, with no vendors being used in the process.
• Asset management staff handle all requests with credit-related implications (e.g., assumptions, partial releases, etc.), which are tracked in the servicing system along with any pertinent comments regarding these requests.
• FNF has an assigned designated liaison for each borrower relationship.
• Credit cases for borrower requests are not automated, nor are they stored in the servicing system. We consider it a best practice to store credit cases in the servicing system.
• Borrowers are provided a written notice 120 days prior to maturity with either terms for renewal or notification that they must seek financing elsewhere.
• There is an established review and approval process with senior management for larger credit matters that may move to the senior portfolio manager or the originator for processing.

Early-stage collections

FNF's portfolio delinquency levels have remained low throughout the last five years, never exceeding 25 basis points (bps; see table 6). Delinquent loan levels are reflected at .07 bps as of June 30, 2024, up just slightly from .06 bps at our prior review. Noteworthy features include the following:

• FNF asset administrators handle all early-stage delinquencies and can use other internal staff as needed.
• Phone calls are made to borrowers within 14 days after the grace periods end (depending on investor requirements), and written collection notices are all sent via email to related parties or mailed if an email address is not available.
• Middle and senior managers review system-generated, daily delinquency reports, which can also be run on demand.
• Borrower collection comments are documented on the servicing system for reference and follow-up.

Loan Administration--Commercial Mortgage Loan Master Servicing

The loan administration subranking is ABOVE AVERAGE.

FNF serves as the master servicer while overseeing five subservicers that manage 136 loans totaling C$972.8 million in UPB as of June 30, 2024. This is a decline of both assets (28% decrease) and UPB (36% decrease) since our prior review (using June 2022 data). There were no delinquencies reported in this master servicing portfolio as of June 30, 2024.

Dedicated portfolio managers and analysts in the master servicing group report to the associate director and team lead who has been with the company over 17 years. The portfolio analysts oversee all the information and data provided by the subservices. The portfolio analyst reviews all the financials, monitors loan performance, and makes watchlist recommendations to the associate director and team lead, as necessary.

Table 7

Master servicing portfolio
	June 30, 2024		Dec. 31, 2023		Dec. 31, 2022		Dec. 31, 2021		Dec. 31, 2020
	UPB (mil. C$)	No.	UPB (mil. C$)	No.	UPB (mil. C$)	No.	UPB (mil. C$)	No.	UPB (mil. C$)	No.
Master (SBO) loans	972.8	136	1,048.2	152	1,108.5	163	1,598.1	207	1,717.2	224
Subservicers	--	5	--	5	--	7	--	9	--	11
Average loan size	7.2	--	6.9	--	6.8	--	7.7	--	7.7	--
Delinquent (%)
30 days	0.00	--	0.00	--	0.25	--	0.00	--	0.00	--
60 days	0.00	--	0.00	--	0.00	--	0.10	--	0.09	--
90+ days	0.00	--	0.00	--	0.51	--	0.23	--	0.35	--
Total	0.00	--	0.00	--	0.76	--	0.33	--	0.44	--
Note: Totals may not add due to rounding. UPB--Unpaid principal balance. SBO--Serviced by others.

New-loan boarding

FNF follows the same standard protocols for new-loan setup of subserviced loans as it does for its primary serviced loan portfolio. For loans serviced by other servicers, a majority of the setup process occurs through electronic means, including downloads from subservicers, with subsequent verification of documents and data.

Subservicer accounting and reporting

FNF has a demonstrated ability and track record in testing and refining operations when reviewing its subservicers. Controls for this process include:

• FNF receives and reviews subservicer reports, electronically uploading these reports to Optimus while manually comparing these reports with its existing data.
• Cash is wired into the FNF clearing account and reconciled with its primary servicing function as applicable.
• Remittance reports are reviewed and approved by the manager.
• The account reconciliation process is automated, and disbursement and clearing account reconciliations are handled monthly.
• There is a segregation of duties and secondary managerial oversight that provides appropriate controls over cash movements and reconciliations.

Subservicer oversight

Escrow administration  

FNF monitors reserve releases on a monthly basis, and they may also be reviewed as part of the annual servicer audit process. Other features include:

• The company monitors subservicer tax reserves quarterly and includes the results of this review as a part of its primary servicer quarterly report.
• Tax and insurance information is not loaded at the loan level, but rather it is monitored via quarterly officer certificates and monthly subservicer reports generated by Optimus.

Asset and portfolio administration  

FNF has sound processes for subservicer loan and portfolio administration. Highlights and controls of these processes include:

• Subservicers are required to submit property financial statements, inspection reports, and borrower requests that require master servicer approval.
• FNF reviews the financial statements as part of the subservicer investor reporting package.
• Staff members review the inspection reports for thoroughness, as well as for indications of deferred maintenance or any other issues.
• The CMBS manager oversees subservicers' credit-related reporting requirements.
• The CMBS manager and SVP of commercial mortgage review borrower requests that require master servicer approval based on information the subservicers supply.
• Typically, FNF, as master servicer, consults special servicers for any breach or default matters that would present a high risk based on an annual review of quarterly financial statements, inspection reports, taxes, insurance, monthly reporting and remittances, and discussions with borrowers and subservicers.
• Master serviced loans are placed on the watchlist following the same criteria used for primary serviced loans.

Audit and compliance  

Within its procedures, FNF outlines requirements for those qualifying as a subservicer (based on systems, corporate financials, insurance, etc.) and for monthly monitoring of subservicers' reporting packages by FNF's CMBS manager. Highlights of the process include:

• Subservicers are required to have annual audits, submit annual compliance certifications, and respond to standard questionnaires.
• Subservicer audits are conducted annually either on site or as desk reviews, depending on portfolio size or proximity to FNF's offices. These audits typically take place in the third and fourth quarter of each year.
• The CMBS manager and pool administrator participate in the compliance review process for subservicers.
• FNF samples subservicer loan files and reviews all watchlist loans in its annual review process.

Investor reporting, advancing, and special servicer interaction 

FNF has standard procedures for monitoring and approving delinquent loan advancing. Highlights and controls of the process include:

• The assistant manager of commercial servicing recommends advances based on a determination of recoverability of up to one mortgage payment, subject to the CFO's approval.
• Monthly advances are reviewed and tested against the respective loans' outstanding principal balance, with appropriate controls over authorizations.
• The company has loans where advances could be required based on performance, with the majority of these being construction advances. Per management, no advances have been made in 2024 for any loan.
• The servicing system processes recoveries received, as necessary.
• The company effectively oversees subservicers by conducting monthly calls and reviews of reporting as well as monitoring portfolio performance and updates on asset status plans. In the instance of loan default, the loan is transferred to the special servicer consistent with the loan documents and is updated in Optimus.

Loan Administration--Commercial Mortgage Loan Special Servicing

The loan administration subranking is ABOVE AVERAGE.

As of June 30, 2024, FNF was named special servicer on five CMBS transactions, which total approximately C$905.6 million in UPB. The special servicing department reported they have 10 CMBS loans or REO assets in the portfolio, out of 50 total loans in special servicing. Only 12 of those are in default, for C$61 million (see table 8). FNF has historically handled numerous workouts under whole-loan and mortgage-backed securities servicing agreements with pension funds, insurance companies, and government agencies since the 1990's.

FNF uses a team approach for special servicing, where loans are assigned to staff based on workloads and expertise. The master servicer typically tracks watchlist loans and consults with the special servicer on any escalations forthcoming. FNF special servicing tracks vacancy over 15%, upcoming maturities on any loan for which they are named special servicer, and various other risk factors to assess potential incoming loans. The special servicing group has also recently been more involved in significant insurance claims; management stated they have seen many more claims in the last two years than in prior years combined.

All CMBS special servicing loans must first be reviewed by the default group in special servicing, as there may be procedures or time commitments in reporting, appraisals, inspections, and file management. Then, complex loans and any REO assets are handled by either the SVP of commercial mortgages or the manager of commercial default management. The remaining special servicing group includes staff with significant loan workout experience. FNF uses standard asset analysis and has a controlled committee approval process for loan resolutions. There was no resolution activity reported since our last review.

Table 8

Special servicing portfolio
	June 30, 2024			Dec. 31, 2023			Dec. 31, 2022			Dec. 31, 2021			Dec. 31, 2020
	UPB (mil. C$)	No.	Avg. age(i)	UPB (mil. C$)	No.	Avg. age(i)	UPB (mil. C$)	No.	Avg. age(i)	UPB (mil. C$)	No.	Avg. age(i)	UPB (mil. C$)	No.	Avg. age(i)
Active inventory
Loans	230.4	50	19.6	179.0	37	21.7	0.0	0	N/A	0.0	0	N/A	0.0	0	N/A
Real estate owned	0.0	0	N/A	0.0	0	N/A	0.0	0	N/A	0.0	0	N/A	0.0	0	N/A
Total	230.4	50	19.6	179.0	37	21.7	0.0	0	N/A	0.0	0	N/A	0.0	0	N/A
Note: Totals may not add due to rounding. (i)Average age reflects the time in months from the date the loan first became specially serviced to the reporting date. UPB--Unpaid principal balance. N/A--Not applicable.

Loan recovery and foreclosure management

FNF displays effective loan recovery and foreclosure management protocols to resolve nonperforming loans, particularly of the multifamily property type. Highlights include:

• The portfolio manager reviews the servicing reports for monetary/nonmonetary issues and monitors property financial statements for declining debt service coverage ratios or occupancy issues.
• Based on investor requirements, transfers to the special servicing workout team may occur sooner than the 60-day servicing agreement default trigger.
• The special servicing team uses standardized templates for workout recommendations made to the committee, which include evaluation of alternative scenarios via net present value calculation, as well as any recourse provisions.
• Management stated that most business plans are developed and approved within 30 to 60 days of a transfer to special servicing.
• Updates to the approved business plan are reviewed monthly to consider the status of borrower negotiations, changes in market conditions, etc.
• The team's manager and asset managers coordinate with approved outside counsel as necessary.

Table 9

Total special servicing portfolio--loan resolutions
	2024(i)			2023			2022			2021			2020
	UPB (mil. C$)	No.	Avg. age(ii)	UPB (mil. C$)	No.	Avg. age(i)	UPB (mil. C$)	No.	Avg. age(i)	UPB (mil. C$)	No.	Avg. age(i)	UPB (mil. C$)	No.	Avg. age(i)
Resolutions
Loans	0.0	0	N/A	0.0	0	N/A	0.0	0	N/A	0.0	0	N/A	0.0	0	N/A
Foreclosed loans	0.0	0	N/A	0.0	0	N/A	0.0	0	N/A	0.0	0	N/A	0.0	0	N/A
Total	0.0	0	N/A	0.0	0	N/A	0.0	0	N/A	0.0	0	N/A	0.0	0	N/A
Resolution breakdown
Returned to master	0.0	0	N/A	0.0	0	N/A	0.0	0	N/A	0.0	0	N/A	0.0	0	N/A
Full payoffs	0.0	0	N/A	0.0	0	N/A	0.0	0	N/A	0.0	0	N/A	0.0	0	N/A
DPO or note sale	0.0	0	N/A	0.0	0	N/A	0.0	0	N/A	0.0	0	N/A	0.0	0	N/A
Foreclosed loans	0.0	0	N/A	0.0	0	N/A	0.0	0	N/A	0.0	0	N/A	0.0	0	N/A
Total/average	0.0	0	N/A	0.0	0	N/A	0.0	0	N/A	0.0	0	N/A	0.0	0	N/A
Note: Totals may not add due to rounding. (i)Data includes only the first six months of the year. (ii)Average age reflects the time in months from the date the loan first became specially serviced to the reporting date. UPB--Unpaid principal balance. N/A--Not applicable. DPO--Discounted payoff.

Power-of-sale/REO dispositions

In many Canadian provinces, power-of-sale provisions exist in the loan documents and have not changed since our last report. These provisions allow lenders to dispose of the property under the borrower's default without having to resort to the courts or take title to the asset.

Given FNF's operating history and the historically low delinquency rates in the Canadian market, FNF has limited experience with such power-of-sale activity or management and disposition of an REO asset. However, the company continues to maintain the necessary policies and procedures for the power-of-sale process to market REO assets, manage the property, and to account and report for the REO properties' income and expenses should the need arise.

REO accounting and reporting

FNF's has standard controls and procedures for property-level accounting and oversight. Although the company has not had any REO assets for some time, the CFO would be tasked to handle the accounting and reporting for these assets. The accounting and reporting procedures would generally follow those described for primary serviced loans.

Subcontracting management

FNF handles the management and oversight of subcontractors in a controlled and effective manner, which is well documented in the P&P manual. Notable highlights include:

• FNF uses standard engagement forms for appraisal, engineering, sales and leasing agents, property managers, and environmental issues.
• The approved vendor list is available electronically, with senior management periodically updating the list.
• FNF's senior committee approves all vendors prior to engagement based on the business plan, which includes an estimate of third-party vendor expenses.
• The assigned portfolio manager monitors vendor performance and task timelines, as well as reviews the final product along with the VP of mortgage services.

Legal department

The legal department has an attorney who assists staff as needed to support special servicing. Other features include:

• In addition to the in-house attorney, the FNF legal department engages with outside counsel on special servicing matters as needed.
• FNF has an approved attorney list and a standard engagement process, but the process is controlled by asset managers and the SVP rather than the in-house legal department, as is generally the case with the highest-ranked servicers.
• FNF uses their own standard attorney engagement letter when using outside counsel.
• Asset-level legal costs require approval by the assigned asset managers. Costs are tracked within the servicing system, which monitors the actual legal costs of special servicing and compares them to budgets within asset status plans.

Financial Position

The financial position is SUFFICIENT.

Related research

• The Importance Of Cyber Security For U.S. And Canadian Servicers In A Challenging Environment, Aug. 12, 2024
• Select Servicer List, May 17, 2024
• Servicer Evaluation: First National Financial L.P., Oct. 12, 2022
• Servicer Category Descriptions Expanded and Revised, Feb. 28, 2022
• Analytical Approach: Global Servicer Evaluations Rankings, Jan. 7, 2019

Servicer Analyst:	Marilyn D Cline, Dallas + 1 (972) 367 3339; marilyn.cline@spglobal.com
Secondary Contact:	Leigh Stafford McLean, Dallas + 1 (214) 765 5867; leigh.stafford@spglobal.com
Analytical Manager:	Robert J Radziul, New York + 1 (212) 438 1051; robert.radziul@spglobal.com