Fitch Affirms ColumbiaNational’s Commercial Primary Servicer Rating

Fitch Ratings – New York – 29 Feb 2024: Fitch Ratings has affirmed ColumbiaNational Real Estate Finance, LLC’s (CNREF) primary servicer rating at ‘CPS2’ and simultaneously assigned a Stable Rating Outlook.


The affirmation of the rating reflects CNREF’s highly experienced and small management team, key person risk, commitment to investments in servicing technology and infrastructure appropriate internal controls including outsourced annual internal audits. The rating also reflects continued strong sponsorship support for the servicing team, some manual functions and demonstrated proficiency servicing more complex, highly structured loans compared to highly rated peers.

CNREF acts as a correspondent lender and servicer mainly for life insurance companies as well as U.S. Department of Housing and Urban Development (HUD) and securitized lenders. As of Sept. 30, 2023, life company loans made up 93% of the total servicing portfolio by loan count, HUD loans made up 6% and securitized loans made up 1%. CNREF employs a total of 29 individuals, with production offices in Washington, D.C. and Baltimore.

The company’s loan originations and servicing portfolio continue to be concentrated in the mid-Atlantic region with approximately 79% of loans located in Maryland, Virginia and Washington, D.C, an increase from prior years. CNREF has had correspondent lending relationships for more than 40 years and currently has 28 different servicing clients.

CNREF maintains an experienced servicing management team as its two senior managers average 30 years of industry experience and 19 years of company tenure. The eight, servicing staff-level employees have strong average experience and tenure with 18 years of industry experience and 10 years with the company. Historically, CNREF has had stable operations with minimal turnover. In the past 12 months, there was 21% overall turnover due to two staff-level departures compared to 22% at Fitch’s prior review and 12% in 2021. Since Fitch’s last review, CNREF hired two employees in asset management to address portfolio growth, recent turnover due to an internal transfer and an expected retirement.

While key-person risk is a concern given the limited number of employees, Fitch believes the company’s staffing remains appropriate relative to the size and servicing requirements of the portfolio. CNREF maintains some of the most experienced management and staff among Fitch-rated servicers and a demonstrated proficiency of loan servicing. The company also outsources for property inspections and data entry to allow staff to focus on analytical functions.

CNREF uses McCracken’s Strategy loan servicing application Version 19D as its system of record. The company is in the early stages of converting to Strategy Version 20, which is expected to be completed in 2Q24. CNREF continues to demonstrate dedication to technology enhancements through further critical cybersecurity updates and a second annual cybersecurity assessment as well as the deployment of a third-party optical character recognition (OCR) application for the data entry and analysis of property financial statements. The company employed the OCR tool for the first time for approximately 40% of loans in the servicing portfolio across all property types.

The company has various quality control measures in place to provide management with reasonable assurance that daily serving operations are performed in compliance with the policies and procedures of the company as well as various lenders and servicing agreements. While CNREF does not maintain separate compliance and internal audit functions found at larger volume servicers, the company engages a third-party vendor to perform servicing audits which have a demonstrated history of no findings and is subject to periodic lender and other external audits.

As of Sept. 30, 2023, CNREF’s total servicing portfolio consisted of 722 loans totaling $6.7 billion. The company acted as primary servicer for 10 securitized loans totaling $93.5 million. CNREF performs primary servicing functions limited to financial statement collection and site inspections on the entire securitized loan portfolio while another servicer performs functions such as payment processing.

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