DBRS Morningstar Assigns MOR CS3 Commercial Mortgage Special Servicer Ranking to CoreVest American Finance Lender, LLC


CMBS DBRS, Inc. (DBRS Morningstar) assigned a MOR CS3 commercial mortgage special servicer ranking to CoreVest American Finance Lender, LLC (CoreVest or the Company), a wholly owned subsidiary and division of Redwood Trust, Inc. (Redwood). The trend for the ranking is Stable.

Including its predecessor companies, CoreVest has a multiyear track record overseeing permanent and transitional small-to-midsized income-producing residential loans and real estate involving single-family rental (SFR) and multifamily housing, which is the Company’s niche business as a lender and asset manager. To date, CoreVest serves solely in an oversight and approver role as a directing classholder (DCH) or principal investor in which it manages assets through third-party servicers and special servicers. DBRS Morningstar believes the Company is positioned with the requisite capabilities to serve directly as a special servicer for its loan products and issued transactions.

The assigned ranking further reflects the following considerations:

  • CoreVest’s experienced management and professional team. Several employees have worked together at other organizations where they managed large portfolios of distressed business-based and small-balance real estate-secured assets.
  • The Company’s operational stability based on moderate employee turnover and no manager turnover during the past two calendar years through Q1 2022. CoreVest’s operating framework, inclusive of the resources provided by Redwood, encompasses the essential components for sound special servicing. To prepare as a named special servicer, CoreVest may gain efficiency by establishing a distinct investor reporting function as well.
  • CoreVest’s successful performance, in its defined role, managing special serviced loans during the past few years, which mostly resulted in full payoffs. The Company also has directly managed and sold more than 25 non-securitized real estate owned (REO) properties since early 2020, with overall excellent outcomes. Additionally, CoreVest has coordinated with external servicers to grant forbearances and other payment relief requests during the Coronavirus Disease (COVID-19) pandemic.
    Supported by its technology, the Company demonstrates solid analytical rigor and proactive asset management, including thorough portfolio surveillance practices. CoreVest has adequately documented policies and procedures, although they could be expanded in scope of areas covered and with more detail.
  • A mostly cloud-based suite of technology applications with solid functionality to address CoreVest’s business needs and asset types. The Company effectively uses a customized version of a Salesforce, Inc. application for workflow/data management and business intelligence used in tandem with Yardi Systems, Inc.’s accounting software and an integrated data warehouse hosted by Amazon Web Services, Inc. A Redwood IT team, with allocated staff for CoreVest, oversees self-managed data centers, acceptable data backup routines, sound data security practices, and annual recovery tests. Data security requirements include annual reviews of third-party service providers.
  • A sound internal audit function that centers on Redwood’s operational audits of CoreVest conducted at least annually. The few exceptions noted in the most recent January 2022 report mostly involved administrative issues that CoreVest has remediated. Should CoreVest become a special servicer on a publicly rated transaction, it will also provide annual Regulation AB attestations.

As of December 31, 2021, CoreVest had nearly $5.0 billion of assets under management in its role as DCH on 19 securitized transactions and controlling party for other non-securitized loan pools. As of December 31, 2021, the active special servicing portfolio contained 87 loans (on a consolidated note basis) and 18 REO assets, with a combined unpaid principal balance of approximately $209.6 million. Approximately 75% of the active assets involved SFR properties and 20% involved multifamily properties. Accordingly, the active portfolio contained more than 1,000 collateral properties. Approximately 54% of the active assets were in securitized transactions.

All rankings are subject to surveillance, which could result in rankings being raised, lowered, placed under review, confirmed, or discontinued by DBRS Morningstar.

DBRS Morningstar North American commercial mortgage servicer rankings are not credit ratings. Instead, they are designed to evaluate the quality of the parties that service commercial mortgage loans. Although the servicer’s financial condition contributes to the applicable ranking, its relative importance is such that a servicer’s ranking should never be considered as a proxy of its creditworthiness.

All figures are in U.S. dollars unless otherwise noted.

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