NEW YORK--(BUSINESS WIRE)--
Fitch Ratings has affirmed the following U.S. residential servicer ratings for JPMorgan Chase Bank, NA (Chase) (note these servicer ratings were formerly under the name of Chase Home Finance LLC).:
-- Residential primary servicer rating for Prime product at 'RPS2+' Outlook Negative;
-- Residential primary servicer rating for Alt-A product at 'RPS2+', Outlook Negative;
-- Residential primary servicer rating for Subprime product at 'RPS2+', Outlook Negative;
-- Residential primary servicer rating for HELOC product at 'RPS2+', Outlook Negative;
-- Residential primary specialty servicer rating for Second Lien product 'RPS2+', Outlook Negative;
-- Residential primary specialty servicer rating for Option ARM product 'RPS2+', Outlook Negative;
-- Residential special servicer at 'RSS2+', Outlook Negative;
-- Residential master servicer at 'RMS2', Outlook Negative.
The servicer rating actions reflect enhancements to Chase's control environment, continued investment in technology to support its mortgage servicing operations, and the company's financial condition. Chase is rated 'A+' with a Stable Outlook by Fitch. A company's financial condition is a component of Fitch's servicer rating analysis.
The Negative Outlook is attributable to the company's continuing obligation to comply with all requirements of the Consent Orders entered into by Chase with the Office of the Comptroller of the Currency, and JPMorgan Chase & Co. and EMC Mortgage Corporation entered into with the Board of Governors of the Federal Reserve System in April 2011. The Negative Outlook also reflects the requirements of the Consent Judgment that Chase and JPMorgan Chase & Co. entered into with the United States of America et al in April 2012. The Consent Judgment requires that the company provide a substantial amount of principal forgiveness that can be applied to non-agency RMBS loans, and Fitch has concerns about the impact on non-agency RMBS transactions serviced by Chase. In addition, the Negative Outlook incorporates instances of material non-compliance contained in the company's Regulation AB report for the year ended Dec. 31, 2011 as well as internal audit findings for the current review period, which have been addressed by management. The master servicing rating reflects Chase's established platform and effective servicer oversight and investor reporting capabilities.
Finally, the ratings reflect Fitch's overall concerns for the U.S. residential servicing industry. These 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.
As of June 30, 2012, Chase's mortgage servicing portfolio was comprised of over 7.6 million loans totaling $1.1 trillion, with 8.2% non-agency first lien prime product, 2.1% first lien Alt-A product, 4.7% first lien subprime product, 18% HELOC product, and 2.9% closed-end second lien product by loan volume. Option ARMs made up 8.2% of the servicing portfolio. Chase's special servicing portfolio was comprised of over 30,000 loans totaling $2.6 billion and its master servicing portfolio was comprised of over 57,000 loans totaling $18.3 billion.
Since Fitch's prior review, Chase enhanced its internal audit program and increased significantly its audit staff resources and the number of audits performed, with a more in-depth focus on mortgage loan servicing, borrower assistance, and foreclosure activities and operations. Chase continues to invest in technology to support its mortgage servicing operations. Projects completed during 2012 included enhancements to payment posting, loan boarding, customer care workstation, single point of contact workflow, and a loss analysis workstation.
Chase's master servicing operation includes monthly risk assessments and annual on-site reviews of its largest servicers. During 2012, the company completed four on-site reviews which covered 98% of the master servicing portfolio.
Fitch has reviewed Chase's servicing operations and believes the company continues to maintain a capable servicing operation with the staff, procedures, controls, default management processes, and technology to manage its current servicing portfolio. Fitch will continue to monitor the company's ability to maintain performance as it pursues its servicing initiatives in this high delinquency environment.
The U.S. Residential Mortgage Servicer ratings sector Outlook remains Negative. 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. 16, 2010);
-- 'U.S. Residential and Small Balance Commercial Mortgage Servicer Rating Criteria' (Jan. 31, 2011).
Applicable Criteria and Related Research:
U.S. Residential and Small Balance Commercial Mortgage Servicer Rating
Global Rating Criteria for Structured Finance Servicers
- Security Upgrades & Downgrades
- Fitch Ratings
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