Fitch Affirms Fannie Mae, Multifamily's Special Servicer Rating
The special servicer rating reflects the company's significant workout experience with multifamily properties throughout the United States, proactive surveillance, efficient use of technology for asset management, and effective internal controls. The rating also considers the experience and tenure of asset management staff which remains high, despite a 16% aggregate reduction in force observed due to the declining number of specially serviced assets since Fitch's last review.
Fitch's assessment of Fannie Mae also reflects the company's use of third-party vendors to perform asset management and disposition services for real estate owned (REO) assets. While certain key special servicing functions are outsourced to vendors, Fannie Mae's highly experienced REO team performs direct oversight of all assets and retains approval authority for all workout decisions. Additionally, all assets are maintained on Fannie Mae's asset management system, vendors are subject to annual performance reviews, and the REO team has the ability to perform the functions outsourced without interruption. For the 12 months ending June 2016, the special servicing group resolved 118 loans representing approximately $763.2 million in outstanding balance primarily through foreclosure and liquidation, modifications, and note sales.
Additionally, the rating also considers the company's financial strength backstopped by the U. S. Treasury. Due to the concentration of servicing for multifamily assets, Fannie Mae's servicer rating is limited to the '2' category.
As of June 30, 2016, Fannie Mae was the named special servicer for approximately 29,000 loans totaling $223.7 billion secured by multifamily properties of which 89% by balance are mortgage backed securities. As of the same date, the special servicing group was responsible for managing a portfolio of 77 defaulted loans and REO assets representing approximately $385.9 million of unpaid principal balance. Fannie Mae's securitized portfolio has increased 21% by balance from year-end 2014 while its non-securitized portfolio has declined 34% over the same period reflecting the company's increased focus on securitization since 2008.