Fitch Affirms Fay Servicing's RMBS Servicer Ratings

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed the following U.S. residential mortgage servicer ratings for Fay Servicing LLC (Fay):

--U.S. residential primary servicer rating for Subprime product at 'RPS3+'; Outlook Stable;

--U.S. residential special servicer rating at 'RSS3+'; Outlook Stable.

The servicer ratings and Stable Outlook reflect Fay's experienced management and staff, robust single point of contact (SPOC) model, enhancements to internal control environment, and integrated servicing technology. In addition, the ratings incorporate the financial condition of Fay, a non-publicly rated entity.

Fay, a wholly owned subsidiary of Fay Financial, LLC, a privately held company, is headquartered in Chicago with additional offices in IL, TX, and FL. As of June 30, 2016, Fay was servicing more than 40,700 loans totaling $9.2 billion, including more than 28,000 subprime loans totaling $5.8 billion.

Fay's senior managers average 22 years of industry experience and five years with company. During the current review period, the company's servicing staff increased to 452 full-time equivalent (FTE) employees from 412 servicing FTEs, and its use of contract and temporary staff decreased significantly to 1% from 15%. Fay does not outsource or offshore any customer contact positions.

Historically, Fay has boarded portfolios with a high volume of non-performing and distressed loans. In Fay's high-touch servicing model, account managers act as the SPOC and handle customer service, collections, and loss mitigation calls with the borrower. Each account manager handles an assigned pool of loans, and is aligned with a specific investor to ensure that account managers are working with consistent guidelines towards the investor's goals. Since Fitch's prior review, Fay established a customer service team that assists with inbound calls on accounts that have been current for an extended period of time, are on auto-ACH, or make their payments prior to the 15th of the month; once a loan no longer meets these criteria, it is assigned to an account manager.

Fay utilizes the three lines of defense internal control structure similar to larger servicers rated by Fitch. Since Fitch's prior review, Fay hired internal audit staff and substantially reduced its dependency on external vendors to perform its internal audit function. Fay also expanded its QA scope to include all activities within the operational areas, and updated its QC criteria to focus on testing against regulatory requirements. Fay's Regulation AB report for the year ended Dec. 31, 2015 did not contain any instances of material non-compliance.

Fay's integrated servicing technology leverages a number of Black Knight Financial Services' (BKFS) applications, including its core servicing system, Mortgage Servicing Package (MSP). Since the prior review, Fay strengthened its technology infrastructure by implementing a new back up data center and enhancing its telecommunication networks. In addition, Fay transitioned its loss mitigation evaluation process to a Sharepoint portal, and upgraded its borrower website to facilitate easy access through mobile devices.

Fitch rates residential mortgage primary, master, and special servicers on a scale of 1 to 5, with 1 being the highest rating. Within some of these rating levels, Fitch further differentiates ratings by plus (+) and minus (-) as well as the flat rating. For more information on Fitch's residential servicer rating program, please see Fitch's report 'Rating U.S. Residential and Small Balance Commercial Mortgage Servicer Rating Criteria', dated April 23, 2015 which is available at 'www.fitchratings.com'.

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

Additional Disclosures

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1015968

Endorsement Policy

https://www.fitchratings.com/regulatory

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View source version on businesswire.com: http://www.businesswire.com/news/home/20161206006252/en/

Fitch Ratings
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Fitch Ratings, Inc.
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or
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Source: Fitch Ratings

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