NEW YORK--(BUSINESS WIRE)--Fitch Ratings has taken the following actions on the U.S. residential primary servicer ratings for Residential Credit Solutions, Inc. (RCS):
--Primary servicer rating for prime product downgraded to 'RPS3+' from 'RPS2-; Outlook Stable;
--Primary servicer rating for subprime product downgraded to 'RPS3+' from 'RPS2-'; Outlook Stable;
--Special servicer rating downgraded to 'RSS3+' from 'RSS2-'; Outlook Stable.
The rating actions reflect observed weaknesses in RCS' control environment that have resulted in negative regulatory reviews; the company's loan transfer process was highlighted as an area of weakness. RCS' management indicated to Fitch the company has enhanced its review process on servicing transfers including improved oversight of data especially for in-flight modifications.
RCS' management also made efforts to address its internal audit program during Fitch's review period. RCS has assessed the company's internal audit program and has contracted with an external third party to conduct its audits going forward. In general, transitions to robust internal audit processes can lead to an initial increase in audit findings, but establishment of a viable internal audit program is expected to ultimately be beneficial to the company.
The Stable Outlook takes into consideration RCS' servicing competence and strong executive management team, which continues to provide stability to the operation.
The ratings also take into consideration the financial condition of RCS' parent company, American Capital Mortgage Investment Corp (MTGE) a non-Fitch rated entity. An internal financial assessment was conducted on the parent company, as the company's financial condition is a component of Fitch's servicer ratings.
RCS operates its servicing platform in Fort Worth, TX with a servicing staff at the time of the review totaling 229 full-time equivalents (FTE). As of Sept. 30, 2015, RCS serviced approximately 65,000 loans totaling $13 billion. The portfolio count comprises 30,908 agency loans, 5,729 Alt-A loans, 13,309 subprime loans, 1,251 high loan-to-value loans, and 1,107 subprime closed end second loans. The servicer performs primary servicing on 60% of its portfolio, special servicing on 7% of the portfolio and subservicing on 33% of the portfolio by loan count.
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 'Rating U.S. Residential and Small Balance Commercial Mortgage Servicer Rating Criteria' (dated April 23, 2015), which is available on the Fitch web site at 'www.fitchratings.com'.
Additional information is available at 'www.fitchratings.com'
Applicable Criteria
Rating Criteria for Structured Finance Servicers (pub. 23 Apr 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864375
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
Additional Disclosures
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=994270
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
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