Servicer Evaluation: Zenith Service SpA

Servicer Evaluation: Zenith Service SpA Servicer Analysts: Fabio Alderotti, London (44) 20-7176-3515; fabio.alderotti@standardandpoors.com Chiara Sardelli, London (44) 20-7176-3878; chiara.sardelli@standardandpoors.com Table Of Contents Major Ranking Factors Opinion Key Changes Since Previous Review Outlook Company Profile Management And Organization Loan Administration Financial Position Related Criteria And Research WWW.STANDARDANDPOORS.COM/RATINGSDIRECT SEPTEMBER 8, 2015 1

Ranking Overview Servicing category Master servicing--residential mortgages Master servicing--commercial mortgages Master servicing--other credits including asset-backed securities and invoiced receivables Overall ranking ABOVE AVERAGE ABOVE AVERAGE ABOVE AVERAGE Management and organization subranking Loan administration subranking Outlook ABOVE AVERAGE ABOVE AVERAGE Positive ABOVE AVERAGE ABOVE AVERAGE Positive ABOVE AVERAGE ABOVE AVERAGE Positive Financial position Sufficient N/A N/A N/A N/A--Not applicable. Major Ranking Factors The company has a stable organization and the managerial team has been strengthened by the appointment of a new chief information officer in 2014. In 2014, Zenith's overall business had further increased since our previous review (see "Servicer Evaluation: Zenith Service SpA," published on March 11, 2014). The company gained 17 new master servicing mandates, totaling 47 servicing agreements at the end of 2014. In our opinion, this shows Zenith's sound ability to attract new clients. Since our previous review, the company has improved its internal process to identify training needs and deliver training classes. Furthermore, the servicer introduced new career developments and a biannual salary review to better incentivize its staff. Zenith doubled its investment in its IT system over 2014 and introduced a new master servicing application, which helped to streamline and standardize the master servicing process. In 2014, we noticed an improvement in the servicer's procedure to monitor and review its subservicers. As a result, Zenith has reviewed all of them over the past 12 months. Opinion Standard & Poor's Ratings Services' overall rankings on Zenith Service SpA (Zenith) are ABOVE AVERAGE as a master servicer of commercial and residential mortgages, and unsecured credits in Italy. We have affirmed our overall rankings on Zenith to reflect our view of the company's operations based on the major ranking factors in our criteria (see "Revised Criteria For Including RMBS, CMBS, And ABS Servicers On Standard & Poor's Select Servicer List," published on April 16, 2009). Key Changes Since Previous Review Since our last review, Zenith has strengthened its information technology (IT) function, hiring a new chief IT officer. Additionally, the company doubled the budget on its IT investment, dismissed its old server, and developed a new internal software application (GAIA) to streamline and standardize the master servicing process, thus increasing automation and productivity. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT SEPTEMBER 8, 2015 2

The company has improved its internal process to identify training needs and design more appealing career developments. Zenith has added 17 new master servicing mandates, totaling 47 master servicing clients as of December 2014. In addition, Zenith changed its headquarters in Milan, moving into a new property building duly refurbished for its business purpose. Outlook We have revised our outlook on the rankings to positive from stable. Zenith's portfolio has been growing steadily over the past three years, reflecting the servicer's capacity to attract new business. The company's new master servicing application supports a good level of automation of its servicing activity and the company has improved its sub-servicer monitoring process. We could consider raising our rankings if the servicer continues to demonstrate good progress in these areas. Company Profile Zenith was established as an independent company in November 1999 and registered under Article 107 of the Italian Banking Act. It manages and oversees securitized and non-securitized loan portfolios from its head office in Milan and second office in Rome. Table 1 Company Overview Servicer name Servicing staff Servicing centers Client types Zenith Service SpA 52, with 10 dedicated to master servicing. Three: one in Milan and two in Rome. One of the offices in Rome is used for business continuity purposes and not for servicing. Italian and international banks, leasing companies, hedge funds, and other finance entities. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT SEPTEMBER 8, 2015 3

Since its incorporation, Zenith has participated in various transactions in a number of different capacities, including as a primary and master servicer. The company also provides a range of other services to the market, such as corporate servicer, representative of noteholders, calculation agent, backup servicer, and backup servicer facilitator, among others. Zenith also manages regulatory activities including Centrale dei Rischi (Bank of Italy's credit information system) and anti-money laundering (AML), and facilitates asset-backed securities reporting facilities for Italian banks to the European Central Bank (ECB). In 2014, Zenith also further expanded other business lines and diversified its offerings, providing new services, including the audit of assets to be included in securitized transactions across different asset classes in Italy and Germany. Zenith was also appointed as security agent for different commercial loans transactions. As of June 2015, Zenith was working in a total of 402 roles as reported in table 2. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT SEPTEMBER 8, 2015 4

Table 2 Roles Overall roles evolution As of Dec. 31, 2013 As of Dec. 31, 2014 As of June 30, 2015 Master servicer 33 40 42 Primary servicing 2 7 7 Corporate servicer 43 61 70 Calculation agent 20 36 46 Back up servicer 15 22 24 Representative of noteholder 20 32 37 PEC 28 46 52 Vigilance signals 29 27 34 Anagrafe dei Rapporti* 35 49 56 Other 56 74 83 *The activity of the Anagrafe dei Rapporti reporting refers to a monthly exchange of information with the Italian Inland Revenue. We have ranked Zenith as a master servicer since 2004.Our rankings relate exclusively to the company's master servicing activity for commercial and residential mortgages and unsecured credits (including nonperforming loans [NPLs]). The total volume of master servicing mandates has increased to 4.5 billion in gross book value (GBV) in 2014 from 2.9 million in 2013. During 2014, the company boarded 1.629 million by GBV of assets through 17 new master servicing mandates. During the first half of 2015, five of the master servicer's mandates expired. However, over the same period, the company boarded 410 million by GBV of assets through seven new master servicing mandates, increasing its customer base to 33 (a mix of Italian and international clients) and not losing any since our review. As of June 2015, Zenith's top five clients accounted for 23% from 24% in 2013. According to its 2015 business plan, the company expected to gain further master servicing mandates by year-end. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT SEPTEMBER 8, 2015 5

Chart 2 Zenith's strategic focus has not changed since our last review, it comprises three key strands: Expanding its business lines (back up servicing, structuring/arranging, ECB reporting, and pool auditing); Consolidating existing business lines (master servicing and enhanced sub-servicer due diligence); and Market positioning. The formulation of Zenith's business plan follows an established, standard process. Senior management prepares a draft plan by the end of February each year. The plan is then fine-tuned during March for approval and inclusion in the company ICAAP (Internal Capital Adequacy Assessment Plan), which is delivered to the company's management board by the end of April. The process is automated, which makes the ongoing monitoring of the business plan more efficient. The aim is for controlled, sustainable growth. Zenith submits the ICAAP annually to the Bank of Italy (BOI) for review. Zenith still considers its business development (BD) activity as key in supporting its growth aspirations. The company has worked on several initiatives to increase its visibility on the market to attract new business. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT SEPTEMBER 8, 2015 6

Management And Organization Our subranking for management and organization is ABOVE AVERAGE based on our view of the following: Structure Zenith's structure remains unchanged since our previous review. The significant change was the appointment of a chief IT officer, who is now in charge of the IT and organization department. Staff As of December 2014, Zenith employed 52 staff, decreasing from the 60 reported at the end of 2013. This was the result of a further restructuring of the primary servicing business based in Rome. As of December 2014, 16 employees worked in Rome, including two members dedicated to master servicing. A further eight staff work in the master servicing department based in Milan. All staff in Milan relocated to the new headquarters, which could easily accommodate staff growth in line with business growth expectations. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT SEPTEMBER 8, 2015 7

Table 3 shows the average experience and tenure of Zenith's staff. Zenith staff show a level of experience that is in line with other master servicers that we rank in Italy. Senior and middle management tenure is lower, but in line with other Italian servicers. Table 3 Overall Staff Evolution (Number Of Staff) 2012 2013 2014 Staff at beginning of period 29 67 60 Number of joiners 38 8 7 Number of staff leaving voluntarily 6 3 Number of expired contracts 9 12 Staff at end of period 67 60 52 Turnover rate 0.00% 22.39% 25.00% Since the company achieved a medium staff size, it has organized monthly meetings with employees based in Milan and Rome. These forums provide staff with an overview of current and future company plans. In our view, this is a useful practice to foster internal communication and staff members' awareness of the company's goals. Turnover Staff turnover was 25% in 2014, slightly higher than 22.39% registered at the end of 2013 and mainly driven by 12 expired contracts of consultants based in the Rome office. Seven new employees were hired in 2014, including one in the master servicing department. Training/development Zenith continues to support its employees' development by providing access to a range of external and internal training courses. The company still targets to make training more relevant to the business and specific to individuals. To this end, in 2014, Zenith started to define specific training for each single resource during the appraisal process. The CEO and HR receive feedback on training from managers and design the annual training plan accordingly. The number of training hours delivered in 2014 increased to an average of 65 per employee, from 63 in 2013. The company has continued its "Reach for Zenith" program, which provides a six-month internship to a student from a local business school. To qualify for the program, candidates must possess certain skills, such as Excel and Word, as well as a knowledge of programing and a command of English. In 2014, Zenith implemented bi-annual salary reviews linked to career development paths to motivate its employees. Staff bonuses are discretionary and are entirely performance-based. Payroll is outsourced to a third-party provider. Systems and technology Zenith ITś team department includes five people, unchanged from our previous review. In 2014, Zenith created and implemented a new application called "Gestione Asset Integrata e Automatizzata" (GAIA). This software substituted the asset-specific applications that Zenith previously used. Staff can now manage every portfolio using a single software application. Clients can upload information on GAIA and Zenith can perform its tasks WWW.STANDARDANDPOORS.COM/RATINGSDIRECT SEPTEMBER 8, 2015 8

on the system. GAIA can also assist with the production of mandatory reports to BOI. In 2014, the company made further IT investments of approximately 850,000, almost doubling its 2013 budget. In our view, this demonstrates a significant commitment by Zenith to maintain a robust and secure IT environment for its business. As planned, Zenith increased the deployment of the Qlikview system for enhanced reporting in 2014 and hired a new senior manager in charge of the IT and organization department. Of Zenith's three servers, one is in Milan and a second in Rome. The third server is located in a third party-owned site in Lugano, Switzerland. Data is stored in each of the sites, the main site being in Milan. If any of the servers is not functioning there is automatic failover to the others. The server in Milan has been moved to the new headquarters. In Rome and Lugano, there is replicated data storage. VMWare software provides virtualization on IBM hardware with a UPS generator, fire alarm, and extinguishers. A domain controller monitors user access and all the servers are backed up daily. There is no need for data to be transferred from one system to another. There are secure access controls within each system to limit logging in to those who are entitled. There are firewalls in place at appropriate points within the platform. Zenith has formal BC and disaster recovery (DR) plans in place. The HR manager and the CEO are responsible for the decision to invoke either or both plans if an event occurs. BC and DR plans were duly reviewed, updated, and tested after Zenith moved into the new office in Milan. There are still two back-up sites: one in Milan and the other in Rome. Both provide a small number of alternative workplaces. For the BC plan, if the Milan office is unavailable for more than 24 hours, a decision is made as to who relocates to the back-up premises. If the unavailability is longer, the company uses the other premises (Milan for Rome and vice versa). The department heads organize travel and accommodation. Zenith performed its most recent BC test in 2014 and reported that operations were up and running in one hour. Some staff can also work from outside of the main premises, for example, from home. From a DR perspective, all servers are backed-up daily. If either Milan or Rome were to lose IT functionality, systems would switch to the other, and/or Lugano. This test was run in 2014 and full availability was restored within three hours. Internal controls The audit function sits outside the operational structure and reports directly to the board of directors through the supervisory board. It also provides reports to the company's statutory auditors. In our opinion, this structure provides adequate independence of the audit discipline from core operations. Zenith appointed a new internal auditor in 2013 to replace the previous auditor who left the company. In previous years the company had relied on audit support from external advisers, but from 2013, this is no longer the case. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT SEPTEMBER 8, 2015 9

The process for the preparation of the audit plan has not changed since our previous report. The internal auditor sits with senior management and they agree on the areas to be audited in the following year using a risk based approach. The audit report is included in the ICAAP report. The audit plan for 2014 covered five operational areas. Each area was graded by level of complexity and level of risk (high, medium, or low). The audit department completed all of the planned audits. From the 2014 review there were no "high risk" findings. When necessary, the auditor will firstly discuss the issue with the head of the department involved. The auditor will then set and monitor a timescale to agree on a resolution. The auditor provides regular reports to the board. Since 2013, Zenith has used a software tool to add automation to the internal audit process. In addition to its own internal audit discipline, Zenith is also subjected to client audits. Three of these were undertaken in 2014 and no issues were reported. The company uses the ICAAP to manage the risks to which it could be exposed. As the ICAAP is submitted to BOI at least annually and is central to operations, it has a high level of focus within Zenith. Senior management meets at least monthly to review risk and submits periodic reports to the company's board of directors. Senior management promotes risk awareness across the business. The risk function supported the administration and accounting department in identifying criteria for loan classification in reporting to BOI and has helped the cost control team in the implementation of new software. The risk department supports the business in an advisory capacity on all new servicing transactions. Zenith has a supervisory board ("organismo di vigilanza") chaired by the head of compliance and with two other non-operational senior individuals. Among other duties, the supervisory board monitors the company's adherence to the Legislative Decree (Law) 231/01 that requires companies to assume responsibility for any crimes that could be committed by directors, management, and/or staff. A Law 231 committee meets quarterly. The company has an established compliance function. One employee manages the risk of Zenith not complying with its legal and regulatory obligations. Compliance is responsible for monitoring any such changes and then takes steps to comply with them and communicate amendments to policies and procedures to staff. Zenith promotes close interaction between all operational departments and compliance. As part of its regulatory obligations, the company has procedures in place to manage AML risk although Zenith has limited AML responsibilities when acting as a master servicer. Zenith has never received a complaint in relation to its master servicing business. Zenith maintains a "regolamento generale" (RG) (policies and procedures manual). The compliance officer is responsible for managing and maintaining the RG and reviews it annually. All staff can access the manual through the company intranet. Version tracking is in place so that previous versions of the manual are also available. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT SEPTEMBER 8, 2015 10

Insurance Zenith has provided us with a copy of its current insurance policy. Loan Administration Our subranking for loan administration is ABOVE AVERAGE. We reviewed all aspects of master servicing. The master servicing business is Zenith's core business and has gained importance over the years compared to other business lines. The master servicing portfolio represents most of the portfolio under management and the master servicing clients represent almost 60% of Zenith's overall client base in 2014, up from 56% last year. In our opinion this shows Zenith's primary interest in its master servicing activity. New portfolio/servicer set-up Zenith gained 17 new master servicing mandates since our 2013 review and in our view, this has provided a good test of the company's portfolio boarding capabilities with the new management system GAIA. The company did not report any boarding error so far. The completion of the initial boarding process takes on average four weeks. Prior to the boarding of a new portfolio, Zenith formulates an agreement with the sub-servicers of the loans/credits in relation to the formatting and storage of the data. This is determined by certain factors: The type of loans/credits; The reporting requirements; and The reporting/collection procedures. Each sub-servicer uploads periodic portfolio updates directly into GAIA through a secured and limited access to the system. GAIA runs automatic data quality checks before information is made available to the master servicing staff. The system automatically notifies each new upload or any missing data on the due date to the relevant master servicing portfolio manager. Master servicing Zenith applies a standard workflow to manage its master servicing obligations which describe how to deploy: Initial acquisition of the portfolio information; Continuous reception of updated data; and Periodic reporting as required. The initial portfolio analysis and the first due diligence on sub-servicers takes about two weeks. The master servicing team carries out the first due diligence (DD) on the sub-servicers with the support of the legal and compliance departments. At least two people are required to attend the on-site DD meeting, which is generally completed in one day. Zenith's clients choose sub-servicers but Zenith's senior management team confirm they are comfortable to work their master servicer based on the DD report. Zenith could in principle reject the mandate otherwise, but all proposed sub-servicers have met Zenith's minimum set of requirements so far. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT SEPTEMBER 8, 2015 11

Zenith has created a defined DD methodology, which covers: Information on the company, its internal regulations/procedures, and staff interviews; An analysis of the IT platforms that the sub-servicers uses; and Document filing and accessibility analysis. Subsequent DDs are based on the latest information periodically sent by sub-servicers. All DD reports are stored electronically in secure folders with access restricted only to authorized users. New on-site audits can take place if Zenith believes there is a potential issue but no on-site visit took place as a cyclical review in the last three years. Zenith will update all DD reports accordingly and will notify all stakeholder parties of any issues arising. Zenith created a DD template and follows it on each DD. In our opinion, this process should benefit its master servicing operations. As of June 2015, Zenith was monitoring 23 sub-servicers, including well-established companies and smaller firms. All received an updated desktop review over the last six months. Zenith plans to review its master servicing workflow to include cyclical on site audits of sub-servicers and a standard DD report template, including a potential ranking of quality of their sub-servicers' operations. This is in line with market best practices and we will closely monitor any development of Zenith's master servicing activity. Zenith's audit department provides independent oversight that the planned DD schedule is being followed. Zenith submits a sub-servicer report every six months to BOI. If Zenith considers it necessary, it would also send an extraordinary report. BOI rules require that a master servicer is able to stand in and replace a sub-servicer at short notice, either itself or through a replacement sub-servicer. Zenith therefore undertakes a detailed DD analysis on each transaction and each sub-servicer so that it can obtain critical information aimed at enabling it to comply with the rules. As part of its planning, Zenith anticipates the potential default of the sub-servicers it monitors, and develops a back-up plan accordingly. Document tracking In its capacity of master servicer, Zenith has limited responsibilities for document checking and retention. Payment processing Zenith has limited responsibilities for payment processing relating to master servicing. These are limited to a supervisory role as opposed to the physical handling of funds. Investor reporting Zenith produces a number of investor and servicer reports in line with the transaction documents to which it is party. Zenith receives data from sub-servicers in different forms and then checks and migrates it onto its own platforms to release portfolio reports. Certain reports are compulsory. Zenith can either produce them from a standard template or can create individual reports where required. The production of reports remains highly automated after GAIA's implementation. It developed this reporting capability internally. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT SEPTEMBER 8, 2015 12

Zenith has streamlined reporting to BOI since 2013. Regulatory reporting is now outsourced to CEDACRI, which is an information platform used widely in Italy for this purpose owned by five Italian banks. In 2014, Zenith sent 21 reports to BOI in line with the company's servicing obligations under Italian Law 130/99 for securitized transactions. Financial Position The financial position is SUFFICIENT. We plan to further review Zenith's financial position when we have received the company's 2014 audited accounts. Should our opinion change, we will provide an update to this report. Related Criteria And Research Related Criteria Revised Criteria For Including RMBS, CMBS, And ABS Servicers On Standard & Poor's Select Servicer List, April 16, 2009 Servicer Evaluation Ranking Criteria: U.S., Sept. 21, 2004 Related Research Servicer Evaluation: Zenith Service SpA, March, 11, 2014 ABOVE AVERAGE Rankings Affirmed On Zenith Service As A Master Servicer In Italy; Outlook Stable, Feb. 17, 2014 Select Servicer List, published monthly Additional Contact: Structured Finance Europe; StructuredFinanceEurope@standardandpoors.com WWW.STANDARDANDPOORS.COM/RATINGSDIRECT SEPTEMBER 8, 2015 13

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