Fitch Revises Ocwen's U.S. RMBS Servicer Ratings; Outlook to Positive

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed the ratings and revised the Rating Outlook on the following U.S. residential mortgage servicer ratings for Ocwen Loan Servicing, LLC (Ocwen) to Positive from Stable:

--Residential primary servicer rating for Prime product at 'RPS4';--Residential primary servicer rating for Alt-A product at 'RPS4';--Residential primary servicer rating for Subprime at 'RPS4';--Residential primary servicer rating for HELOC product at 'RPS4';--Residential primary servicer rating for Closed-end Second Lien product at 'RPS4';--Residential special servicer rating at 'RSS4';--Residential master servicer rating at 'RMS4'.

Fitch's Rating Outlooks indicate the likely direction of any rating change over a one- to two-year period and may be Positive, Negative, Stable or, occasionally, Evolving.

The ratings reflect Fitch's assessment of evidenced proficiencies in Ocwen's servicing operation. Weaknesses in Ocwen's corporate governance and operational control framework were key factors in the downgrade of Ocwen's servicer ratings in February 2015. Fitch found that Ocwen's aggressive portfolio growth, staff expansion, and integration process did not result in a unified and cohesive risk management framework for its entire servicing business. While the company realized greater economies of scale as a result of its acquisitions and utilization of technology, its investment in risk management lagged. This resulted in serious deficiencies being identified by external parties and a number of regulatory settlements over the past several years.

Ocwen is currently constrained from acquiring any additional mortgage servicing rights (MSRs) in connection with its consent order with the New York Department of Financial Services (NY DFS) entered into in December 2014 and its consent order with the Department of Business Oversight of the State of California (CA DBO) entered into in January 2015. Also, pursuant to company's announcement in December 2014, Ocwen has been actively selling its agency MSRs. As a result, Ocwen's servicing portfolio has decreased significantly to 2,361,220 loans totaling $376.6 billion as of March 31, 2015.

Fitch has observed recent progress made by Ocwen in its corporate governance and operational control framework. Ocwen continues to enhance its 'three lines of defense' approach to risk management which incorporates risk management responsibility at the employee level first; within risk management, compliance, and legal groups second; and within internal audit third. The company has hired additional staff to support the risk management function and internal audit, and has expanded its regulatory compliance and compliance testing departments.

The company also recently completed a risk and control self-assessment (RCSA) to identify inherent and residual risks in its business operations, and to assess mitigating controls for inherent risks and the status of any residual risks. RCSA is expected to be an annual exercise for process mapping and risk assessment. Fitch believes these changes should contribute to more effective business operations for the benefit of all constituents.

In addition, Ocwen initiated a process to compile and review all of its servicing policies and procedures, and to identify controls in all policies to be monitored for compliance. The company is also developing new training programs in an effort to ensure that all employees are performing their functions in accordance with approved policies and procedures.

Ocwen is in the implementation stage of needed improvements, and recent steps taken to strengthen its risk management framework and management oversight have been positive. Fitch views the changes required by the recent regulatory settlements to be a net positive.

Factors that may affect Ocwen's servicer ratings and Outlook include:--Effectiveness of the recent risk management framework changes to identify and resolve regulatory, compliance and operational risks internally prior to the issues being identified externally;--Results of external regulatory reviews, including any by the operational monitor for the NY DFS or the recently announced auditor for the CA DBO;--Ocwen's responsiveness to regulatory or compliance issues identified by internal or external reviews;--Retention of experienced management and staff;--Any financial or operational developments that could increase the risk of a deterioration or disruption in servicing quality.

On June 24, 2015, Fitch also affirmed the long-term Issuer Default Ratings (IDRs) of Ocwen Financial Corporation and its wholly-owned primary operating subsidiary, Ocwen, at 'B-'. Ocwen's senior secured term loan and Ocwen Financial Corporation's senior unsecured notes have also been affirmed at 'B-/RR4' and 'CC/RR6', respectively. In addition, the Rating Outlook has been revised to Stable from Negative. A copy of Fitch's Financial Institutions rating action commentary on Ocwen is available by clicking on the following link:https://www.fitchratings.com/gws3.0/fitch-home/pressrelease?id=986899>

Additional information is available on www.fitchratings.com

Applicable CriteriaRating 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

Additional DisclosuresSolicitation Statushttps://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=986901Endorsement Policyhttps://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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/20150624006315/en/

Fitch Ratings
Primary Analyst
Thomas Crowe
Senior Director
+1-212-908-0227
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Roelof Slump
Managing Director
+1-212-908-0705
or
Committee Chairperson
Lee Tam-Blumenthal
Senior Director
+1-212-908-0323
or
Media Relations
Sandro Scenga, New York, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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