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Servicer Evaluation: Bank of New York Mellon Corp.


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Servicer Evaluation: Bank of New York Mellon Corp.

Ranking Overview
Servicing category Overall ranking Management and organization Loan administration Ranking Outlook
Financial position


S&P Global Ratings' rankings on Bank of New York Mellon Corp. (BNY Mellon) as a commercial loan primary, master, and special servicer are AVERAGE. On Nov. 16, 2021, we affirmed our overall rankings on BNY Mellon as a primary, master, and special servicer (please see Bank Of New York Mellon Corp. AVERAGE Commercial Mortgage Servicer Rankings Affirmed; Ranking Outlook Stable published Nov. 16, 2021). The ranking outlook for all three is stable.

Our rankings reflect BNY Mellon's:

  • Management team, with adequate experience, well-tenured middle managers, and staff;
  • Effective audit, compliance, and control processes;
  • Effective technology systems and applications;
  • Comprehensive employee training program; and
  • Limited size and declining servicing portfolios, which inhibits the ability to robustly test the effectiveness of controls.

Since our prior review (see "Servicer Evaluation: Bank Of New York Mellon Corp.," published March 2, 2020), the following changes and/or developments have occurred:

  • The commercial mortgage-backed securities (CMBS) primary servicing portfolio continues to run off, with only three CMBS loans remaining that have a combined unpaid principal balance (UPB) of approximately $336.7 million as of June 30, 2021, a reduction from $367.0 million.
  • Excluding the CMBS portfolio, BNY Mellon primarily services only $22.5 million of UPB across 24 assets, reflecting a reduction from approximately $50.0 million of UPB.
  • BNY Mellon reported only one loan remaining in the master servicing portfolio (i.e., serviced by others) with an UPB of approximately $800,000 as of June 30, 2021.
  • The group manager of commercial mortgage services left the company in July 2020 and was replaced with an internally promoted employee who has 26 years of experience and 21 years with the company.
  • In March 2021, BNY Mellon upgraded to version 5.0 from version 2.0 of the Precision LM loan system.
  • The company implemented its business continuity plan in March 2020 due to the COVID-19 pandemic, with all employees working remotely with no reported disruptions or delays in daily operations. Staff began returning to the office in May 2021.

The ranking outlook for each of the rankings is stable. Despite continued run-off in its portfolios, we expect BNY Mellon to maintain the staff, processes, and technology systems required to administer its portfolio according to generally accepted servicing practices. We note the change at the Dallas group manager position has occurred twice in three years; however, BNY Mellon maintains the bulk of its well experienced and tenured staff. We will continue to monitor staffing going forward.

In addition to conducting a virtual meeting with servicing management, our review includes current and historical Servicer Evaluation Analytical Methodology data until June 30, 2021, as well as other supporting documentation the company provided.


Servicer Profile
Servicer name Bank of New York Mellon Corp.
Primary servicing location Dallas, Texas
Loan servicing system LMS 5.0

BNY Mellon is a global investments company, which services financial assets throughout the investment lifecycle. As of June 30, 2021, BNY Mellon had $45 trillion in assets under custody and/or administration, and $2.3 trillion in assets under management in 35 countries. BNY Mellon operates under the corporate brand of The Bank of New York Mellon Corp. (Bank) (NYSE: BK).

BNY Mellon's commercial mortgage loan servicing operation, located in Dallas, is part of the Bank's corporate trust division. All employees of the servicing operation are Bank employees. The Bank provides administrative and operational support to the commercial mortgage loan and asset-backed lending markets for securitizations.

The commercial mortgage loan servicing operation, which is operated under the nationwide bank of the same name, services various commercial asset classes, including CMBS, tax receivables, as well as franchise and business loans. However, over the past several years, the dollar volume of its modestly sized primary and master servicing portfolio has steadily declined totaling $360 million UPB as of June 30, 2021 (see table 1).

The current business strategy of BNY Mellon includes leveraging both existing and new clients to service niche products, such as intercompany loan portfolios, and the company is engaged in conversations with various firms at this time. Management indicated that they continue to monitor opportunities in primary and master servicing of CMBS and would pursue deals that prove cost effective; however, no new transactions have been boarded since our last review.

Table 1

Total Servicing Portfolio
UPB (mil. $) YOY change (%)(i) No. of assets YOY change (%)(i) No. of staff YOY change (%)(i)
Primary/master servicing
June 30, 2021 360.0 (3.2) 27 (12.9) 10 11.1
Dec. 31, 2020 372.1 (10.1) 31 (44.6) 9 (18.2)
Dec. 31, 2019 414.1 (6.6) 56 (16.4) 11 10.0
Dec. 31, 2018 443.5 (21.4) 67 (35.6) 10 0.0
Dec. 31, 2017 564.2 104 10
Special servicing
June 30, 2021 0.2 (29.2) 2 (33.3) 4 0.0
Dec. 31, 2020 0.3 38.9 3 50.0 4 0.0
Dec. 31, 2019 0.2 (69.7) 2 (33.3) 4 0.0
Dec. 31, 2018 0.7 (78.1) 3 0.0 4 (33.3)
Dec. 31, 2017 3.3 3 6
(i) June 30, 2021 YOY change based on the prior year end. YOY--Year-over-year. UPB--Unpaid principal balance.

Table 2

Portfolio Overview
June 30, 2021 Dec. 31, 2020 Dec. 31, 2019 Dec. 31, 2018 Dec. 31, 2017
UPB (mil. $) No. UPB (mil. $) No. UPB (mil. $) No. UPB (mil. $) No. UPB (mil. $) No.
Primary loans 359.2 26 371.1 29 412.3 54 439.5 64 554.1 94
Master (SBO) loans 0.8 1 1.0 2 1.8 2 4.0 3 10.1 10
Total servicing 360.0 27 372.1 31 414.1 56 443.5 67 564.2 104
Average loan size 13.3 -- 12.0 -- 7.4 -- 6.6 -- 5.4 --
Special servicing
Loans 0.2 2 0.3 3 0.2 2 0.7 3 3.3 3
REO properties - - - - -
Total special servicing 0.2 2 0.3 3 0.2 2 0.7 3 3.3 3
Totals may not add due to rounding. SBO--Serviced by others. REO--Real estate owned. UPB--Unpaid principal balance.

Table 3

Primary/Master Portfolio Breakdown By Property Type And State(i)
UPB (mil. $) UPB (%) No. of properties Properties (%)
Defeased Loans 336.7 93.5 1 3.3
Multifamily 19.8 5.5 9 30.0
Other/Various 2.7 0.8 19 63.3
Healthcare 0.8 0.2 1 3.3
Self Storage 0.0 0.0 0 0.0
All Other 0.0 0.0 0 0.0
Total 360.0 100.0 30 100.0
Defeased/Unsecured loans 336.7 93.5 1 3.3 2 loans, one property. Defeasance, March 2020 (management meeting)
NY 19.8 5.5 9 30.0
CA 2.0 0.6 15 50.0
WA 0.8 0.2 1 3.3
TX 0.5 0.1 3 10.0
All Other 0.2 0.0 1 3.3
Total 360.0 100.0 30 100.0
Totals may not add due to rounding. (i)As of Jun. 30, 2021. UPB--Unpaid principal balance.

Table 4

Primary/Master Portfolio By Investor Product Type(i)
Loan Type UPB (mil. $) Loan count UPB (%) Loan (%)
CMBS/CDO/ABS 337.6 3 93.8 11.1
Other third party investors (REITs, investment funds, etc.) 22.5 24 6.2 88.9
Total 360.0 27 100.0 100.0
Totals may not add due to rounding. (i)As of Jun. 30, 2021 UPB--Unpaid principal balance.

Management And Organization

The management and organization subrankings for BNY Mellon are ABOVE AVERAGE for primary, master, and special servicing.

Organizational structure, staff, and turnover

The servicing group reports to a Dallas-based group manager, who in turn reports to the New York-based senior group manager of client services. This group consists of three main areas:

  • Commercial mortgage loan asset management, which handles all asset management functions and communications with borrowers.
  • Operations, which is responsible for the day-to-day money movement, payment posting, lockbox monitoring, and handling of financial and borrower data updates to the loan system.
  • Investor reporting, which is responsible for monthly investor payments and reporting, including Commercial Real Estate Finance Council (CREFC) and trustee reporting, special billings, and financial projects.

These areas are further supported by corporate resources in business development, compliance, human resources, and information technology (IT).

Since our last review, the group manager for asset management left the company in summer of 2020. His position was filled by the promotion of a new group manager who has been with BNY Mellon for 21 years and has over 26 years' experience in the industry. This group manager reports to the senior group manager of client services who is based in New York and previously managed the group.

As of June 30, 2021, BNY Mellon had 10 full-time employees dedicated to primary and master servicing. Within the special servicing area, there are four full-time shared staff members who can devote their resources where needed; however, due to the smaller portfolio, management feels there is little need for dedicated staff. In addition, there are three employees providing shared services and other loan administration support to the servicing group. While lacking the staffing depth of most servicers we rank, all levels of management have industry experience that is higher than that of similarly ranked peers. Similarly, the company maintains tenure levels above that of similarly ranked peers at all levels.

Overall, BNY Mellon staffing levels have remained relatively stable during the last several years. Primary servicing turnover, which was 30% during 2019, has stabilized since our last review at 18% for the full year of 2020 and no departures in the first half of 2021. We note two departures in primary and master servicing, which included the group manager after a short tenure in the role. One person departed the small staff of special servicing since our last review. We remain comfortable with management experience and current staffing levels at the existing volume of work.

Table 5

Years of Industry Experience/Company Tenure(i)
Senior managers Middle managers Asset managers Staff
Industry experience Company tenure Industry experience Company tenure Industry experience Company tenure Industry experience Company tenure
Primary 33 22 26 21 N/A N/A 23 15
Master 33 22 26 21 N/A N/A 23 15
Special 0 0 26 21 24 16 21 16
(i)As of Jun. 30, 2021

We believe BNY Mellon's training and retention programs are effective, given the size and experience of the servicing staff. Highlights include:

  • BNY Mellon's global learning and organizational development group supports personal and professional development through an extensive array of department-directed courses and human resource programs.
  • The company utilizes an automated new-hire curriculum for new employees before they begin their first day with the company. The goal of this program is to give the employee the ability to discuss specific training goals and objectives with their manager on day one.
  • The company primarily utilizes web-based training, enabling employees to learn at their own pace. The employee must pass an online exam at the end of the training session to obtain credit.
  • All corporate training hours are tracked through the My Development system, which is programmed to send "coming due" and "overdue" emails to employees and managers regarding their training classes. Training hours for servicing level employees are separately and manually tracked through an excel spreadsheet.
  • Since our last review, development courses were added such as leadership training and diversity training.
  • The training goal is 40 hours per employee per year which is comparable with our other ranked peers. During the first half of 2021, the primary and master servicing employees averaged 21 hours of training, while the special servicing staff completed an average of 22 hours. According to management, the groups met their training goal with averages of 41 and 43 hours, respectively, for year-end 2020.
  • In addition to training and career development, employee engagement committees are managed at the Bank level to enhance employees' company involvement. Additionally, annual employee surveys are conducted to evaluate employee satisfaction, as well as areas for improvement.
Systems and technology

BNY Mellon has efficient technology for its servicing needs, considering the size of the current portfolio. With the operation's small size, some systems are still run manually by an experienced staff. Key elements of its systems and applications, business continuity/disaster recovery programs, and cybersecurity environment are discussed below:

Servicing system applications 

We believe BNY Mellon's servicing system applications are efficient for its current scale and provide a good level of process automation. Additionally, the Bank's four IT professionals provide support to the servicing group. Some notable technology features include:

  • Precision 5.0, the servicing system for the company. The web-based system provides complete functionality for mortgage loan processing and asset management. BYN Mellon upgraded from version 2.0 in March of 2021. Management indicates the upgraded systems offer more automation and time saving features such as bulk upload.
  • TreasuryEdge, a platform internally developed by BNY Mellon. It is used for external fund transfers, primarily commercial mortgages, syndicated loans, and agency services. All incoming and outgoing wires are tracked through TreasuryEdge and reconciled by staff.
  • Nexen, a proprietary system used to transfer funds internally between accounts. Account Control System (ACS) contains a tickler system for each portfolio serviced for all compliance, reporting, and/or cash movements required under the specific servicing agreements. Weekly past-due tickler reports are generated and emailed to the appropriate asset manager and group manager.
  • CSC Financial Online, which is a nationally recognized web-based application for tracking and filing Uniform Commercial Code financing statements (UCCs). Additionally, BNY Mellon tracks all UCCs on the Bank's internal iLien system as a secondary tickler-tracking program for all expirations and transactions.
  • Advanced Imaging System, which is an internet-based proprietary system used to scan and store loan-level documents, trust indentures, pooling and servicing agreements (PSAs), cash management agreements, etc.

Business continuity and disaster recovery 

BNY Mellon maintains a comprehensive business continuity and disaster recovery plan, which it tests annually. Additional highlights include the following:

  • The most recent disaster recovery test occurred on February 21, 2021, with no material issues noted.
  • Data is backed up nightly and stored offsite at a Tennessee-based data center, with a backup site located in New Jersey. For all servicing functions, the plan calls for business resumption within one day.
  • All employees can work from home via remote virtual private network (VPN), and this capability is tested annually.
  • The company maintains a local contingency site near the Dallas office that is on a separate power station more than 25 miles away and can accommodate all full-time employees. The company also has offices in other cities that could accommodate employees in a disaster situation.


The company has a solid approach with multiple layers in place to monitor cybersecurity issues. Features include the following:

  • The Bank has a dedicated group to identify and protect against cybersecurity threats. They maintain a classification policy that ranks information into different levels of confidentiality and locks down user controls to only those needing access based on their job function.
  • Systems have multiple layers of security controls and are monitored for vulnerabilities and risks. The Bank's cybersecurity and risk management programs constantly evolve based on new threats, which are assessed between all separate business units.
  • According to policy, phishing emails are sent to employees to test cybersecurity awareness semiannually; however, according to management, in practice emails are generally sent more often.
  • The company maintains insurance for computer crimes, privacy, and internet liability.
  • Penetration testing is conducted quarterly by a third-party vendor. For the most recent test as of August 2021, while management provided a summary page, it would not provide results as it deems them proprietary. Management stated there were no significant issues.
Internal controls

BNY Mellon maintains controls that include well-documented policies and procedures (PnPs) and internal and external audits. The company also benefits from the Bank's institutional resources, including the features described below.

Policies and procedures 

BNY Mellon has documented PnPs, which generally cover their servicing functions, although it does not maintain specific PnPs for specially serviced loans. While management believes its other PnPs cover this area, we believe this is a shortcoming compared with other ranked peers. Features include the following:

  • The online PnP manual is detailed and references forms, system data fields, and reports.
  • After being sent to the business standards group for review, senior management approves change requests, which are announced via global emails and followed by specific training sessions for the affected departments.
  • Since our last review, the process was changed to date PnPs to reflect the most recent update. Management indicated periodic reviews are conducted on PnPs which get verified at the corporate level.

Compliance and quality control 

The Bank has a dedicated control group to provide quality assurance and review that each business line complies with the Bank's policies, laws, and regulations, along with third-party servicing contracts, including PSAs. The group provides a customized and comprehensive testing plan that includes end-to-end assessments of selected high-risk transactional reviews, process reviews, and special testing as requested by senior management. Furthermore, the control group has a reporting structure that is completely independent of the business line.

Internal and external audits 

Internal audits of the servicing operations are conducted every 36 months by the Bank's internal audit department. Timing of these audits, which is longer than what we typically see with similarly ranked peers, is based on internal audit's assessment of risk and the results of the unit's most recent audit. The most recent audit was completed in September 2018, which is well outside the timeframe from most servicers we rank. Management indicated an ongoing global client service audit was conducted at the corporate level, but the servicing group had not received specific requests for information related to the audit. Since BNY Mellon's servicing division is part of the broader Bank, they are usually subject to more rigorous banking standards than a typical standalone commercial servicer. Nonetheless, the lengthy periodicity is a shortcoming.

A nationally recognized third-party firm performs the annual Uniform Single Attestation Program (USAP) testing requirements for the BNY Mellon servicing group. No material exceptions were identified in the 2020 USAP report. BNY Mellon is not subject to Regulation AB attestation.

Vendor management 

We believe BNY Mellon's procedures for managing its vendors are sufficient. Asset managers handle engagement of third-party service providers for appraisals, engineering/environmental reports, property management, and brokers as needed. Management maintains and reviews an approved list of qualified vendors based on performance. BNY Mellon maintains approved vendor lists should site inspections be necessary. Standardized agreements are used, and the structured finance senior manager reviews the work product before payment authorization.

Insurance and legal proceedings 

BNY Mellon has represented that its directors and officers, as well as its errors and omissions insurance coverage, are in line with the requirements of its portfolio size. As of the date of this report, the company reported no material servicing-related pending litigation items.

Loan Administration--Primary Servicing

The loan administration subranking is AVERAGE for primary servicing.

BNY Mellon's strategy is to provide mortgage servicing at a low cost, typically in conjunction with other bank business opportunities. BNY Mellon does not purchase mortgage servicing rights. The company focuses on looking for opportunities in commercial real estate while marketing itself as a specialty provider for various asset types, such as franchises, asset-backed securities (ABS), and insurance securitizations. We note the continued decline of the servicing portfolio's loan counts and UPB.

As of June 30, 2021, the primary servicing portfolio contained 26 loans with a total UPB of $359.2 million. Given the limited size of the overall portfolio, we do not consider it to be diverse by any metric, including property type (see table 3), geographic location (see table 3), and investor type (see table 4).

The total number of loans serviced has continued to decline over the past several years. Since our last review, the primary portfolio has declined in both the number of loans and UPB after various short-term loans were paid off or matured. Delinquencies have remained minimal since 2017, unaffected by the COVID-19 pandemic.

Table 6

Primary Servicing Portfolio
June 30, 2021 Dec. 31, 2020 Dec. 31, 2019 Dec. 31, 2018 Dec. 31, 2017
UPB (mil. $) No. UPB (mil. $) No. UPB (mil. $) No. UPB (mil. $) No. UPB (mil. $) No.
Primary loans 359.2 26 371.1 29 412.3 54 439.5 64 554.1 94
Average loan size 13.8 -- 12.8 -- 7.6 -- 6.9 -- 5.9 --
Delinquent (%)
30 days 0.0 0.0 0.1 1.4 0.1
60 days 0.0 0.0 0.0 0.0 0.0
90+ days 0.0 0.0 0.0 0.0 0.0
Total 0.0 0.0 0.1 1.4 0.1
Totals may not add due to rounding. UPB--Unpaid principal balance.
New loan boarding

BNY Mellon's operations group handles the loan setup and boarding process. Since our last review, no new loans were boarded. Key process steps include the following:

  • Personnel enter all loan and reserve account data into the Precision 5.0 servicing system using the loan documents as the source input, and ticklers are created in the ACS.
  • New loans for large portfolios are set up in the system via a spreadsheet uploaded into the Precision 5.0 system.
  • The loan data entry is reviewed by an asset manager or other designated administrator to confirm data integrity.
  • Trailing loan documents are tracked via Precision 5.0.
  • Welcome letters are sent to borrowers within five business days of new loan boarding.
Payment processing

The operations group, consisting of three staff members, handles billing statements and payoff calculations, processes cash receipts, and monitors suspense items. Highlights of payment processing include the following:

  • Payments are received via various electronic methods, including automated clearing house (46%), wire transfer (31%), and lockbox (23%).
  • Check logs are reconciled to the system entries daily.
  • Any checks received at the servicer location are deposited daily and are not kept in a fireproof safe. The group uses copies of checks to post payments to the system.
  • BNY Mellon has separate personnel responsible for check batching, deposit preparation, and payment posting to the system.
  • Approximately 65.3% of the primary portfolio consists of adjustable-rate mortgages, and the operations group has a controlled audit process to verify rate adjustments.
Investor reporting

The investor reporting group consists of two staff members. BNY Mellon has CMBS industry-standard reporting capabilities, as well as customized third-party reporting. Highlights of investor reporting include the following:

  • The three primary responsibilities of investor reporting are to report, remit, and reconcile loan-level payment information.
  • The reports are prepared according to the PSA or other relevant servicing agreement. Customized reports and remittances are prepared for the trustee as agreed to in the PSA, including following the CREFC standards for reporting.
  • The group reviews reports and remitting to trustees or investors. Remittance reports must be approved by the asset manager and the group manager (or designee).
  • It is generally the master servicer's responsibility to report directly to the trustees.
  • The company's investor reporting and asset management staff ensure the accuracy and correctness of all information reported to the trustees.

Escrow administration

We believe the company has effective controls for escrow administration. The function is handled by two separate senior analysts and includes the following:

  • After loans are boarded to the system, the escrow administrator conducts a quality control review of the tax and insurance data, verifying all pertinent data points. BNY Mellon works with a third-party vendor to verify real estate taxes.
  • Only 19% of loans are escrowed, for both taxes and insurance, respectively.
  • On escrowed loans, a tax administrator runs reports to verify if impound accounts have the necessary funds to pay taxes. If there is a shortage, the appropriate asset manager will reach out to the borrower.
  • On non-escrowed loans, if BNY Mellon receives notifications after the delinquency date that taxes are not being paid by the borrower, the asset manager notifies the borrower that the taxes are overdue. If they are not paid in a timely manner, depending on the servicing agreement, taxes may be advanced and/or the loan may be sent to special servicing.
  • An insurance analyst reviews insurance expiration reports for the portfolio. Renewal letters are sent 30-45 days before expiration.
  • Per BNY Mellon PnPs, second-, and final-notice letters are sent 10 days after expiration. Phone calls to the borrower and the insurance agent are made before the expiration date.
  • Asset management is kept apprised of insurance issues 10 days prior to any insurance expirations by the insurance specialist, and together they work through resolutions.
Asset and portfolio administration

We believe that BNY Mellon has sound procedures covering asset and portfolio administration tasks. Notable features include the following:

  • Asset managers are responsible for regularly reviewing property inspections and property financial statements.
  • The Precision 5.0 system uses CREFC criteria and electronically sends watchlist triggers for poor performance to the asset manager to discuss with the borrower.
  • Deferred-maintenance-item letters are sent to borrowers generally within 10 days of identification and the items are tracked in the system until completion has been verified.
  • Asset managers review and handle loan-level covenant compliance issues and are alerted of due dates by the ACS system-driven triggers.
  • The company reported that loans assigned credit risk ratings are not regularly reviewed and updated because changes are handled on an ad hoc basis. We have observed that most of our ranked servicers routinely review all loans on the watchlist for changes (positive or negative) in credit standing.
  • Asset management reviews maturity reports monthly and sends maturity notification letters to the borrower at six months and three months before maturity, following up with telephone calls as necessary. If a loan is not paid off at maturity, depending on the product type, transfer procedures are followed per the relevant documents.
  • UCC administration expiration reports are reviewed for all loans annually. UCC continuation statements are sent to the proper filing authority to be recorded, with all information stored in the automated tracking system.
  • Recorded UCC information is updated in the vendor system, as well as the iLien system, to reflect the new lapse date and recording number.
Borrower requests

BNY Mellon has processes in place for asset managers to approve borrower consent requests. Features include the following:

  • BNY Mellon credit committee approval is required for transactions, including assumptions and transfers for loans, as well as any required approvals specified in the governing documents.
  • The BNY Mellon credit committee's voting members include the senior group manager of structured finance and specialty, a credit risk representative (or appointee), and the group manager of commercial mortgage services. Ex officio members include a representative from the internal legal department, a presenting asset manager, and the credit committee secretary.
  • Borrower transactions are tracked and documented in Precision.
  • During 2020, two defeasance requests were completed. During the first half of 2021, BNY Mellon reported no borrower consent requests.
Early-stage collections

The servicing staff handle the early-stage collections. Noteworthy features include the following:

  • Asset management works with borrowers in an attempt to bring delinquent loans current. According to company policy, the asset manager contacts the borrower by telephone to determine the payment status within 15 days after the loan grace period expires.
  • If the loan is still in default on the 30th day after the grace period, a written delinquency notification is sent to the borrower.
  • The asset manager attempts to have the borrower supplement the payment with personal funds or turn over net operating income generated from the collateral property.
  • On the 45th day after the grace period expires, a second delinquency notification letter is sent, notifying the borrower that if payment is not made by the 60th day, the loan will be transferred to the special servicer.

We note that while BNY Mellon has policies for addressing delinquent loans, most servicers we rank make contact by telephone and/or in writing with delinquent borrowers immediately after the grace period expires. In discussions with management, they stated that they are generally more proactive in calling delinquent borrowers, but their policies are written with much longer time frames to allow for different investor requirements.

Loan Administration--Master Servicing

The loan administration subranking is AVERAGE for master servicing.

As of June 30, 2021, BNY Mellon was the named master servicer, where it has subservicer oversight responsibility, on only one loan aggregating approximately $830,000 in UPB (see table 7). Despite a low volume of master serviced loans, the company continues to maintain resources, systems, and processes to comply with its master servicing duties. However, the portfolio's low volume and limited growth prospects inhibit BNY Mellon's ability to display its master servicing capabilities in a meaningful way.

Table 7

Master Servicing Portfolio
June 30, 2021 Dec. 31, 2020 Dec. 31, 2019 Dec. 31, 2018 Dec. 31, 2017
UPB (mil. $) No. UPB (mil. $) No. UPB (mil. $) No. UPB (mil. $) No. UPB (mil. $) No.
Master (SBO) loans 0.8 1 1.0 2 1.8 2 4.0 3 10.1 10
Subservicers -- 1 -- 2 -- 2 -- 2 -- 3
Average loan size 0.8 -- 0.5 -- 0.9 -- 1.3 -- 1.0 --
Delinquent (%)
30 days 0.0 0.0 0.0 0.0 0.0
60 days 0.0 0.0 0.0 0.0 0.0
90+ days 0.0 0.0 0.0 0.0 0.0
Total 0.0 0.0 0.0 0.0 0.0
Totals may not add due to rounding. SBO--Serviced by others. UPB--Unpaid principal balance.
New loan boarding

All master serviced loans are set up in Precision 5.0, using the same process as primary serviced loans. Other features include:

  • Loan payments are "shadow posted" into Precision 5.0 based on reports received from the primary servicer, and all balances are verified.
  • BNY Mellon handles the trust reporting unless otherwise required in the documents.
  • Key servicing duties are abstracted from servicing agreements for online access by BNY Mellon personnel.
Subservicer accounting and reporting

We believe the company has adequate controls for subservicer accounting and reporting activities. The main features include the following:

  • Asset management and the group manager (or designee) reviews and approves remittance reports.
  • Different personnel handle remitting than those who handle the bank reconciliations. Custodial account reconciliations have a secondary review and sign off.
  • There were no unidentified items in the custodial accounts aged greater than 60 days as of June 30, 2021.
  • There were no penalties for late reporting during the first half of 2021.
Subservicer oversight

Escrow administration  We believe the company has adequate controls for subservicer oversight of escrow administration. The main features include the following:

  • BNY Mellon reviews loan-level exception reports on both tax escrow and insurance coverage from their subservicers monthly.
  • Subservicer tax administration compliance certifications are reviewed annually.
  • In-house staff reviews the insurance policies for loans serviced by others.

Asset and portfolio administration  

We believe the company has adequate controls for asset and portfolio administration oversight activities. The main features include the following:

  • CREFC watchlist reporting is completed on the master servicing portfolio and reviewed monthly.
  • UCC exception reports from subservicers are reviewed monthly.
  • Property inspection reports are stored online and accessible via the system. All significant deferred maintenance items are tracked in the system until completion.
  • Property financial statements are re-spread and analyzed by BNY Mellon staff.
  • BNY Mellon has recurring calls with their subservicers to discuss loan/portfolio status.

Audit and compliance 

BNY Mellon has adequate controls regarding overall subservicer compliance at its current portfolio level. Features include the following:

  • BNY Mellon has three staff members available who can provide subservicer oversight and compliance.
  • The PnP manual details subservicer audits and compliance reviews. Portfolio administration personnel generally perform onsite or desktop reviews annually. BNY Mellon conducts annual desk audits for compliance against the PSA using a standard questionnaire.
  • Two separate desk audits were completed during the first half of 2021, and management indicated they were performed according to industry standards.
Advancing and special servicer interaction

Management indicated that advances are rare for the master servicing portfolio. Nonetheless, the company formally tracks each loan's cumulative advances compared to the collateral's liquidation value, limiting its maximum advances to 45% of the value. We believe BNY Mellon has adequate tracking in their system and sufficiently detailed PnPs in place to monitor advances. The company also maintains procedures to monitor special servicers' efforts, when applicable.

Loan Administration--Special Servicing

The loan administration subranking is AVERAGE for special servicing.

As of June 30, 2021, the company was actively managing two special serviced loans totaling approximately $200,000 (see table 8). BNY Mellon has no active real estate-owned (REO) assets and, as a result, no dedicated staff. Currently, the asset manager who handles the performing loan would also serve as the special servicing asset manager if any of the loans in their portfolio become seriously delinquent. The limited depth of personnel with workout experience among the remaining staff to handle complex special servicing issues, is a limiting ranking factor.

Unlike most special servicers we rank, BNY Mellon maintains no specific PnPs for their specially serviced loans. The company feels the governing documents for each deal defines the special servicing process required for that specific investor. In our view, this is an inherent weakness to special servicing operations.

Table 8

Special Servicing Portfolio
June 30, 2021 Dec. 31, 2020 Dec. 31, 2019 Dec. 31, 2018 Dec. 31, 2017
UPB (mil. $) No. Avg. age (i) UPB (mil. $) No. Avg. age (i) UPB (mil. $) No. Avg. age (i) UPB (mil. $) No. Avg. age (i) UPB (mil. $) No. Avg. age (i)
Active inventory
Loans 0.2 2 36.5 0.3 3 49.4 0.2 2 58.9 0.7 3 52.3 3.3 3 61.3
Real estate owned 0.0 0 - 0.0 0 - 0.0 0 - 0.0 0 - 0.0 0 -
Total 0.2 2 36.5 0.3 3 49.4 0.2 2 58.9 0.7 3 52.3 3.3 3 61.3
Totals may not add due to rounding. (i)Avg. age reflects the time in months from the date the loan first became specially serviced to the reporting date.
Loan recovery and foreclosure management

Since our last review, there has been no significant changes regarding loan recovery and foreclosure management, and resolution activity was minimal (see table 9).

  • Business plans, including loan requirements, collateral property status, local market conditions, resolution alternatives, and economic analyses are completed within 60 days of the loan transfer to special servicing.
  • The company requires borrowers to sign pre-negotiation letters before commencing workout discussions. It also maintains a committee for evaluating resolution plans, which includes representatives from the line of business, senior management, and the corporate credit risk division.
REO management and dispositions,

BNY Mellon has not managed REO assets since the end of 2011 (and as a company has limited REO management experience) and does not maintain REO PnPs. Given the resources of the Bank, however, we believe it could maintain adequate controls over REO property cash flows on a limited basis should the need arise.

Table 9

Total Special Servicing Portfolio--Loan Resolutions
2021(ii) 2020 2019 2018 2017
UPB (mil. $) No. Avg. age(i) UPB (mil. $) No. Avg. age(i) UPB (mil. $) No. Avg. age(i) UPB (mil. $) No. Avg. age(i) UPB (mil. $) No. Avg. age(i)
Loans 0.0 0 - 0.3 1 8.2 0.0 0 - 3.0 1 117.5 0.0 0 -
Foreclosed loans 0.0 0 - 0.0 0 0.0 0.0 0 - 0.0 0 0.0 0.0 0 -
Total 0.0 0 - 0.3 1 8.2 0.0 0 - 3.0 1 117.5 0.0 0 -
Resolution breakdown
Returned to master 0.0 0 - 0.3 1 8.2 0.0 0 - 3.0 1 117.5 0.0 0 -
Full payoffs 0.0 0 - 0.0 - - 0.0 0 - - 0.0 0 -
DPO or note sale 0.0 0 - 0.0 - - 0.0 0 - - 0.0 0 -
Foreclosed loans 0.0 0 - 0.0 0 - 0.0 0 - 0 0.0 0 -
Total/average 0.0 0 - 0.3 1 8.2 0.0 0 - 3.0 1 117.5 0.0 0 -
Totals may not add due to rounding. (i)Avg. age reflects the time in months from the date the loan first became specially serviced to the reporting date. UPB--Unpaid principal balance. DPO--Discounted payoff.
(ii) Data only includes the first six months of the year
REO accounting and reporting

Due to the small size of the specially serviced portfolio and lack of any REO assets, the company has not conducted any recent onsite accounting audits. Furthermore, existing technology applications are acceptable and capable of delivering required investor reports and tracking property-level activity.

Legal department

The special servicing team uses the Bank's legal department in New York to assist as needed, with one attorney dedicated for BNY Mellon's use. Special servicing asset managers work closely with the Bank's legal department in selecting approved attorneys for particular assignments, reviewing and approving engagement contracts, and monitoring and approving monthly invoices.

Related Research

Servicer Analyst:Marilyn D Cline, Dallas + 1 (972) 367 3339;
Secondary Contact:Benjamin Griffis, Centennial + 1 (303) 721 4672;
Analytical Manager:Robert J Radziul, New York + 1 (212) 438 1051;

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