Fitch: Stability Improving for U.S. RMBS Servicers Amid Challenges

NEW YORK--(BUSINESS WIRE)-- Amidst recent challenges to select portfolios, U.S. RMBS servicers by and large are showing improvements in managing challenged portfolios within a framework of tighter compliance and regulatory scrutiny, according to Fitch Ratings.

Despite general overall progress, challenges remain. Fitch is seeing costs of servicing continue to rise in concert with an increased compliance focus and enhanced regulatory scrutiny. Higher regulatory capital requirements may become a factor too, especially for smaller servicers. Additionally, more capital may be required to be set aside as rates rise and mortgage servicing rights (MSR) values increase. Smaller servicers (many not rated by Fitch) may experience greater difficulty in the environment of rising costs and may begin to look to strategic alternatives.

That said, current ratings and outlooks for servicers covered by Fitch are indicative of generally good performance and improved stability.

Fitch's servicer review process provides a key indication of servicer performance, providing primary servicer ratings across the full spectrum of RMBS products, along with Master servicer, special servicer and small balance commercial servicer ratings.

Fitch rates servicers on a scale of one to five, with one being the highest rating. Within some of these rating levels, Fitch further differentiates ratings by plus (+) and minus (-). Of the 89 individual servicer ratings covered within RMBS:

--9% within the level one range (1 or 1-);

--54% within level two (2+, 2 or 2-);

--29% within level three (3+, 3 or 3-);

--8% currently at level four.

No servicers carry a five rating.

Level one servicers demonstrate superior performance in overall ability, with all areas of the organization operating at top efficiency and productivity. Level two servicers show high overall performance, while level three servicers exhibit performance to a standard of proficiency in all areas. Fitch further defines level four servicers as lacking proficiency due to a weakness in one or more areas of servicing ability and level five servicers as demonstrating limited to no proficiency in servicing ability.

Fitch uses Rating Watch if a rating change is likely within a six-month period and Rating Outlook to indicate the direction that a rating is likely to move over a one- to two-year period. Currently no servicer ratings are on Rating Watch, which indicates that there is not a heightened probability of rating changes in the near term. 65% of the US RMBS servicer ratings carry a Stable outlook, with 18% of the ratings on Outlook Positive, and 17% on Outlook Negative.

Further detail on Fitch's US RMBS servicer rating methodology is provided in the criteria report cited below, along with individual servicer reports and the comprehensive US RMBS Servicer Handbook.

Additional information is available on www.fitchratings.com.

Applicable Criteria

Rating Criteria for U.S. Residential and Small Balance Commercial Mortgage Servicers (pub. 23 Apr 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864368

Related Research

U.S. RMBS Servicer Handbook (Servicing At A Glance)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=872614

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.

View source version on businesswire.com: http://www.businesswire.com/news/home/20151023005462/en/

Fitch Ratings
Roelof Slump
Managing Director
+1-212-908-0705
Fitch Ratings, Inc., 33 Whitehall Street, New York, NY, 10004
or
Media Relations:
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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