Fitch Affirms Walker & Dunlop's Commercial Primary Servicer Rating

Fitch Ratings has affirmed Walker & Dunlop, LLC's (Walker & Dunlop) primary servicer rating at 'CPS2-'.

The primary servicer rating reflects Fitch's assessment of the company's strong management team, appropriate internal controls, and integrated technology platform of externally developed systems. The rating also considers Walker & Dunlop's private label outsourcing agreement with Midland Loan Services, Inc. (Midland), and the ability to manage contracted services as well as bringing functions in-house on a limited basis. Additionally, the rating incorporates the adequate financial condition of the parent, Walker & Dunlop, Inc., to support the servicing platform.

Walker & Dunlop is a commercial mortgage finance company that originates and retains servicing of commercial real estate loans primarily through government-sponsored enterprise (GSE) lending programs. Through its predecessor Walker & Dunlop Inc., founded in 1937, Walker & Dunlop has extensive experience as a mortgage finance company, particularly with multifamily properties which make up 89% of the servicing portfolio by balance as of March 31, 2014. The company's largest servicing clients by balance are GSEs and the U.S. Department of Housing and Urban Development representing approximately 89% of the servicing portfolio, with the GSEs forming the majority at 76%, consistent with prior years.

Walker & Dunlop has been operating on a private-label shared services agreement with Midland since 2009, with Midland responsible for most loan servicing functions such as new loan boarding, cash management and taxes and insurance. Walker & Dunlop retains responsibility primarily for customer service, investor reporting, asset administration, and oversight of outsourced functions. Although the degree to which processes are outsourced is material, the rating reflects Walker & Dunlop's ability to manage the contracted services and the company's experienced managers capable of bringing functions in-house on a limited basis. The company's outsourcing model allows it to maintain a larger servicing portfolio relative to other rated primary servicers of similar staff size.

As of March 31, 2014, Walker & Dunlop's total servicing portfolio consisted of 4,586 loans totaling $38.9 billion, of which 371 loans totaling $7.1 billion were CMBS from mostly Freddie Mac capital markets execution transactions. The company has seen an increase of 856% by balance in its CMBS servicing portfolio from December 2011 to March 2014, due mostly to the company's increased participation in Freddie Mac's capital markets execution transactions.

The servicer rating is based on Fitch's methodology, as described in the reports highlighted at the end of the press release.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'U.S. Commercial Mortgage Servicer Rating Criteria' (Feb. 14, 2014);

--'Rating Criteria for Structured Finance Servicers' (Jan. 30, 2014).

Applicable Criteria and Related Research:

U.S. Commercial Mortgage Servicer Rating Criteria -- Effective Feb. 18, 2011 to Feb. 14, 2014

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=584005

Rating Criteria for Structured Finance Servicers

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=731750

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=861275

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.