Link to Fitch Ratings' Report: Ocwen-Serviced U.S. RMBS Rating Actions
for Jan. 28, 2015
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=861430
Fitch Ratings has placed 297 U.S. RMBS classes from 135 transactions on Rating Watch Negative. All of the classes are rated above 'Asf' and are collateralized with mortgage loans serviced in part by Ocwen Loan Servicing (Ocwen). The rating action reflects the increased risk of a temporary servicer disruption.
The Rating Watch status is expected to be resolved within 30 days upon completion of an ongoing assessment of Ocwen's servicing operations. Fitch currently expects most of the classes placed on Watch to be downgraded to 'Asf'. The classes affected represent approximately 2% of all U.S. RMBS classes currently rated above 'Asf'.
A spreadsheet detailing the actions can be found on Fitch's website by performing a title search for 'Ocwen-Serviced U.S. RMBS Rating Actions for Jan. 28, 2015' or by clicking the link.
KEY RATING DRIVERS
Fitch has applied rating constraints to Ocwen-serviced U.S. RMBS since 2012 due to the unique risks related to the rapid growth of the company's servicing portfolio. With a non-agency servicing portfolio of just under $200 BN, Ocwen is the largest servicer of non-agency U.S. RMBS loans and manages roughly one in four of all loans in non-agency U.S. RMBS mortgage pools.
To date, Fitch's rating constraints have focused primarily on subprime RMBS, where Ocwen's market share is largest. The size of the portfolio and the increased cost and heightened regulatory requirements of servicing subprime loans in particular limits the number of companies willing and able to quickly assume the servicing rights in the event a servicing transfer is required.
Today's rating actions anticipate expanding the constraints to all mortgage sectors, reflecting Ocwen's growth in the Prime and Alt-A sectors. Additionally, while Fitch previously allowed some Ocwen-serviced subprime RMBS to be rated above 'Asf' if the class was expected to payoff in full within one year, the rating constraints will now likely apply to all classes, regardless of time to payoff. To determine whether to apply a rating cap, Fitch focuses on the relationship between the bond's payment priority and the amount of the mortgage pool that may be affected by a temporary servicing disruption of Ocwen-serviced loans.
In recent months, Fitch has taken several rating actions related to Ocwen. On Oct. 24, 2014, Fitch placed Ocwen's primary servicer ratings of 'RPS3' on Rating Watch Negative due to concerns over corporate governance and the operational control framework of the company. On Dec. 23, 2014, Fitch downgraded the Issuer Default Rating of Ocwen Financial Corp. to 'B-' from 'B', reflecting increased strategic uncertainty following the announced departure of the firm's Executive Chairman and an expectation of increased earnings pressure as a result of heightened compliance standards.
RATING SENSITIVITIES:
Fitch is currently conducting an assessment of Ocwen's servicing operations. The ratings of the U.S. RMBS included in today's action will be influenced by Fitch's opinion of Ocwen's ability as a primary servicer, as reflected by Fitch's servicer and Issuer Default ratings.
Fitch's primary servicer rating for Ocwen of 'RPS3' is currently on Rating Watch Negative. Fitch's Issuer Default Rating for Ocwen Financial Corp. of 'B-' currently has a Negative Rating Outlook.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'U.S. RMBS Surveillance and Re-REMIC Criteria' (June 24, 2014);
--'Global Structured Finance Rating Criteria' (May 20, 2014);
--'U.S. RMBS Loan Loss Model Criteria' (Nov. 17, 2014);
--'U.S. RMBS Cash Flow Analysis Criteria' (April 16, 2014);
--'Criteria for Interest Rate Stresses in Structured Finance Transactions' (Jan. 23, 2014);
--'Criteria for Rating Caps and Limitations in Global Structured Finance Transactions' (May 28, 2014);
--'Counterparty Criteria for Structured Finance and Covered Bonds' (May 14, 2014);
--'Structured Finance Recovery Estimates for Distressed Securities' (Nov. 18, 2011).
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=978756
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