Litton Stepping into Commercial Servicing

With a recent initial rating of ‘average’ for commericial special servicing from Standard & Poor’s, residential mortgage giant Litton Loan Servicing is dipping its toes into the commerical market as a small balance commercial loan servicer. Litton is known as one of the nation’s largest special servicers of distressed residential assets, with an emphasis on special servicing. The company plans to leverage its expertise in residential loan servicing as it enters the commerical market, and has formed a separate department led by a manager with direct commercial servicing experience to oversee its commercial borrower relationships, investor reporting content, and liaison with other functional departments, many of which include a person dedicated to the commercial portfolio. Standard & Poor’s defines small balance commercial loans as income-producing real estate loans with balances that are typically under $1 million and generally not greater than $3.5 million. The servicing of these loans typically involves a hybrid approach, blending elements of traditional residential and commercial mortgage servicing. According to Standard and Poors, a residential servicing operation can accommodate small balance commercial borrowers by deploying its existing customer service call center tools, cash processing procedures, and proactive early collection techniques. As of June 30, 2006, Litton serviced 783 loans of this type totaling $332.8 million in unpaid balances ($425,000 average loan size). Litton recently completed its first securitization secured completely by this asset type, with an average loan size of $421,850. Within the past few months, the commercial servicing operation at Litton has continued to grow, with the company obtaining another third-party assignment, according to records obtained by Housing Wire.