- Expertise with client and investor reporting: Midland has a high degree of experience and a successful performance record as a commercial mortgage-backed securities (CMBS) primary and master servicer with respect to timely and accurate reporting, investor satisfaction, responding to information requests, the overall quality of asset-level reporting content, controlled advance determination procedures, proactive sub-servicer oversight and auditing, investor website functionality, and the management of other duties covering large and complex transactions. Midland did not incur any material reporting errors or restatements during 2012 or the first half of 2013. In addition, Morningstar holds a positive opinion of Midland's CMBS master servicing capabilities as demonstrated by the company's capacity to meet its ongoing advancing responsibilities and representations regarding its financial resources.
- Excellent technology: Midland has effective technology tools, which provide high levels of automation and centralized data management, to accommodate a large and diverse servicing portfolio with a high degree of operating efficiency.
- Solid management depth: Midland has overall operational stability and a significant amount of industry experience among its management and portfolio management staff, although the servicing staff as a whole has less-than-average industry-related experience compared with other master servicers Morningstar reviews. Midland continues to maintain a centralized servicing operation within the United States and does not use offshore servicing functions.
- Comprehensive audit program more aligned with its parent audit requirements: Midland has improved upon its already comprehensive audit program by aligning the depth of review with its parent bank's audit program. As a result, Midland undergoes more stringent security-level testing related to its technology and servicing operations as a whole. An independent quality control and regulatory compliance department examines a broad range of loan administration and portfolio management processes, and is supplemented with a number of performance monitoring activities and compliance routines embedded in the company's daily workflow practices.
- Well-controlled asset management practices and effective conflicts of interest management: Midland demonstrates best practices for proactive asset management and portfolio oversight, and maintains effective policies and procedures to manage conflicts of interest. A subsidiary of Midland's parent bank, The PNC Financial Services Group, Inc., has an approximate 20 percent ownership interest in BlackRock, Inc., which invests in CMBS. With respect to conflicts of interest, Midland stated that, as part of a regulated bank, it must comply with federal regulations in its interaction with affiliates, and as a result, must treat BlackRock the same as any other non-affiliated entity. Overall, Morningstar views Midland as a special servicer that operates essentially without the potential conflicts of interest inherent in many CMBS transactions in which the special servicer has a close affiliation with the first loss (B-piece) investor. In addition, Midland does not use affiliates to purchase assets from securitization trusts as the company's business model requires it to act as an independent, third-party special servicer without any investment in subordinate CMBS.
- Continuing successful performance as a special servicer: Midland continues to have a very successful asset resolution performance record as a special servicer and is proactive, particularly with respect to monitoring advances and asset valuations.
Morningstar Credit Ratings, LLC Affirms Its 'MOR CS1' Commercial Mortgage Primary, Master, And Special Servicer Rankings For Midland Loan Services
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