NEW YORK--(BUSINESS WIRE)--Fitch Ratings has taken the following rating actions on the U.S. residential servicer ratings for Ocwen Loan Servicing, LLC (Ocwen):
--Residential primary servicer rating for subprime product affirmed at 'RPS3', removed from Watch Negative, and assigned Outlook Stable;
--Residential special servicer rating affirmed at 'RSS3, removed from Watch Negative, and assigned Outlook Stable.
The ratings affirmations, removal from Rating Watch Negative, and assignment of Outlook Stable to the servicer ratings are based on improvements in Ocwen's inbound call metrics and staff turnover rates, although staff turnover continues to be higher than most other rated servicers as well as Ocwen's highly integrated technology environment and robust investor and borrower websites. However, the ratings take into account Fitch's concerns surrounding Ocwen's high concentration of servicing operations located off-shore and the financial condition of Ocwen's parent, Ocwen Financial Corp., which is rated 'B+' with a Negative Outlook by Fitch.
The ratings reflect Fitch's overall concerns for the U.S. residential servicing industry which include the ability to maintain high performance standards while addressing the rising cost of servicing and changes to industry practices, which are likely to be mandated by regulators and other parties. The ratings were determined in accordance with Fitch's criteria 'Rating U.S. Residential and Small Balance Commercial Mortgage Servicer Rating Criteria' and 'Global Rating Criteria for Structured Finance Servicers' which are available on the Fitch Ratings web site at 'www.fitchratings.com'.
Ocwen operates its servicing platform from sites in West Palm Beach and Orlando, FL, Houston, TX and global servicing offices in Bangalore and Mumbai, India, and Montevideo, Uruguay. All of the worldwide operations are wholly owned and operated by Ocwen. Fitch maintains its concerns regarding the company's staffing strategy which places a heavy emphasis on off-shore operations. Recently completed acquisitions included replacing most of the seasoned servicing staff at acquired platforms with newly hired staff predominantly in the global offices. As of April 30, 2012, more than 85% of the company's staff was based off-shore, including approximately 90% of customer facing functions.
Since Fitch's prior review, Ocwen significantly increased staffing in its customer care center which handles both customer service and collection functions for loans up to 89 days delinquent, which has resulted in materially improved average speed to answer and abandonment rates for inbound calls. In addition, Ocwen established a small customer facing presence in Houston, TX. Fitch will continue to monitor Ocwen's ability to manage its large scale off-shore operations and pursue its servicing initiatives in this high delinquency environment.
As of April 30, 2012, Ocwen serviced over 739,000 loans totaling $112.8 billion, a 65% increase in loan count from its servicing portfolio as of June 30, 2011. The portfolio consisted of 85.6% subprime, 4.6% Freddie Mac, and 4.2% Alt-A product by loan volume. Recent portfolio acquisitions include 63,000 loans totaling $10.7 Billion from Saxon and 41,000 loans totaling $7.9 Billion from JPMorgan Chase Bank, NA.
The U.S. Residential Mortgage Servicer ratings sector remains on Negative Outlook. On Nov. 4, 2010, Fitch assigned a Negative Outlook for the entire U.S. Residential Mortgage Servicer ratings sector on increased concerns surrounding alleged procedural defects in the judicial foreclosure process.
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 Jan. 31, 2011, which is available on the Fitch Ratings web site at 'www.fitchratings.com'.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Global Rating Criteria for Structured Finance Servicers' (Aug. 13, 2010);
--'U.S. Residential and Small Balance Commercial Mortgage Servicer Rating' (Jan. 31, 2011).
Applicable Criteria and Related Research:
Global Rating Criteria for Structured Finance Servicers
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547305
U.S. Residential and Small Balance Commercial Mortgage Servicer Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=600065
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