Fitch Takes Rating Actions On Several Servicers

Posted by Orb Staff on April 30, 2010 No Comments
Categories : Mortgage Servicing

Fitch Ratings has taken actions on several residential mortgage servicer ratings. The agency upgraded the primary specialty-reverse servicer rating belonging to Financial Freedom Acquisition LLC, a subsidiary of OneWest Bank FSB. Financial Freedom's rating was boosted from RPS3- to RPS3. The actions reflect Financial Freedom's experienced senior management team, established reverse mortgage servicing experience, and solid technology platform, Fitch says.

Financial Freedom, while headquartered in Irvine, Calif., conducts its servicing operations from Austin, Texas; Kalamazoo, Mich.; and Norcross, Ga. As of Dec. 31, 2009, Financial Freedom managed a reverse mortgage portfolio of nearly 164,000 loans with an unpaid principal balance of approximately $24.5 billion.

IndyMac Mortgage Services (IMS), also a division of OneWest Bank, has had its primary servicer ratings for prime, Alt-A and subprime products affirmed at RPS2-, RPS3+ and RPS3+, respectively. The company's special-servicer rating was upgrated to RSS2- from RSS3+.

The upgrade of the special-servicer rating reflects IMS' continued investment in default systems and established processes for managing and liquidating nonperforming loans and real estate owned (REO) assets, Fitch says. IMS's servicing operations are located in Austin, Kalamazoo and Pasadena, Calif. As of Jan. 12, IMS serviced a portfolio of over 599,000 loans with an unpaid principal balance of approximately $148 billion, consisting of 49.7% GSE, 44% Alt-A, 3.4% subprime and 1.4% prime product by loan volume.

Since the last review, the company has made operational and technological improvements to increase efficiencies across the servicing platform. IMS combined its customer service, collections, and front-end loss mitigation and foreclosure areas into an Enterprise Call Center, in order to provide a single point of contact for borrowers. To support this change, IMS expanded its call-center training curriculum to focus on the processes, organization, tools and technologies utilized by call-center agents. Additionally, to handle increased modification volumes, IMS developed a proprietary system to effectively manage end-to-end loan modification processes.

Fitch has also affirmed Walter Mortgage Co.'s (WMCo) primary servicer rating for subprime product at RPS3-, reflecting WMCo's seasoned management team, adequate loan administration procedures and competent default management practices.

WMCo's servicing operation is headquartered in Tampa, Fla., with additional servicing sites in Alabama, Mississippi, North Carolina, Oklahoma and Texas. As of the end of February, WMCo's servicing portfolio consisted of over 34,900 accounts totaling $1.8 billion, with approximately 87% of the accounts included in residential mortgage-backed securities (RMBS) and the balance owned by the company.

Approximately 90% of the accounts in WMCo's servicing portfolio had been sourced through Jim Walter Homes (JWH), an affiliated home builder that was closed in December 2008. The balance of WMCo's servicing portfolio was purchased from third parties – including other home builders, mortgage companies and banks – under a program that the company terminated in August 2007 in light of volatile market conditions.

WMCo's business model for servicing focuses on a niche market that includes accounts originated by JWH that often involve first-time home buyers and are generally subprime fixed-rate mortgage loans with rural collateral.

WMCo's strategy of high-touch, direct contact servicing, employing field representatives who are involved in all stages of collections and default management through disposition of real estate owned properties allows the company to pursue loss mitigation resolutions during the collections process on a face-to-face basis but results in a significantly higher cost of servicing than most subprime servicers, Fitch says. However, WMCo's portfolio performance is also stronger as a result, with overall delinquencies of 12.8% as of Feb. 28.

Since Fitch's prior review, WMCo realigned its field servicing divisions and created two new divisions to improve its control environment for field operations. The company also began utilizing a net-present-value model and standardized checklist for loss mitigation and implemented the use of online evaluation websites and broker price opinions to augment its in-house property valuations.

Additionally, Fitch has taken rating actions on Bridgefield Mortgage Co. (formerly known as ResMAE Mortgage Inc.). Bridgefield's special servicer rating was affirmed at RSS3-, and its primary servicer rating for subprime product was withdrawn.

The special-servicer rating is based on Bridgefield's experienced management and robust servicing technology, competent default management ability, and established processes for managing and liquidating nonperforming loans and REO assets, Fitch says. The withdrawal of the rating for primary servicer of subprime product is due to a lack of information specifically regarding volume of first-lien subprime assets.

Bridgefield is located in Overland Park, Kan., and is owned by an affiliate of Citadel Investment Group LLC. Bridgefield's servicing management averages 19 years of industry experience. As of Jan. 31, Bridgefield's servicing portfolio totaled approximately 2,600 first- and second-lien subprime loans for approximately $530 million. However, during the review, Bridgefield was also performing a limited-scope engagement for a mortgage insurance company consisting of contacting delinquent borrowers in an effort to determine the borrower's situation and facilitate a resolution with the borrower's current servicer.

Bridgefield's servicing technology includes its proprietary servicing module, which Fitch says is an internally developed and supported application that wraps the core servicing system. The initial focus in developing the module was on loss mitigation applications, and the system incorporates proprietary models for probability of default, loss projection, and best execution in an effort to determine the most appropriate resolution for delinquent loans.

Fitch has reviewed the company's servicing operations and believes that Bridgefield has the infrastructure and technology to support its servicing portfolio. However, Fitch says it is concerned that no new loans have been added to Bridgefield's servicing platform since the initial boarding of the legacy ResMAE loans in January 2008 and that the servicing portfolio continues to run off at a significant pace.

SOURCE: Fitch Ratings

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