NEW YORK--(BUSINESS WIRE)--
Fitch Ratings has affirmed the following U.S. residential mortgage servicer ratings for PHH Mortgage Corporation (PHH Mortgage):
--Primary servicer rating for Prime product affirmed at 'RPS2+'; Outlook revised to Stable from Negative;
--Primary servicer rating for Alt-A product affirmed at 'RPS2+'; Outlook revised to Stable from Negative;
--Primary specialty sub-servicer rating at affirmed at 'RPS2+'; Outlook revised to Stable from Negative;
--Primary servicer rating for Home Equity (HELOC) product affirmed at 'RPS2+'; Outlook revised to Stable from Negative.
The rating actions reflect the increased corporate governance changes that the servicer introduced, along with the continued enhancements that were incorporated in its audit, compliance, quality control and training departments. The servicer also expanded its compliance testing, internal audit and quality control processes throughout the servicing platform.
Additionally, on May 28, 2013, Fitch affirmed the parent company, PHH Corporation's (PHH) long-term Issuer Default Rating at 'BB' and revised to Outlook Stable from Negative. A company's financial condition is a component of Fitch's servicer ratings. Additional information on PHH Corp. is available at 'www.fitchratings.com'.
During the period under review, the servicer's 2012 REG AB Report, similar to the 2011 Report, indicates that certain foreclosure proceedings were not concluded in accordance with the published Federal National Mortgage Association (FNMA) foreclosure timelines. This has been a finding for several Fitch-rated servicers. However, PHH Mortgage disputed the REG AB finding, stating that the allowable delays were not correctly considered in the foreclosure timelines.
In addition, PHH Mortgage's average percentage of completed foreclosures that exceeded FNMA guidelines was reduced significantly to 64% from 95%, which according to the servicer was due to the material changes to the attorney oversight and audit processes that were implemented at the start of 2012. Fitch believes that, based on the company's efforts, PHH Mortgage will continue to show improvements in this area.
PHH Mortgage has an established history of 31 years with their private label and subservicing platforms and has completed various strategic partnership arrangements. This included the May 1, 2013 subservicing transfer with HSBC covering over 296,000 loans for approximately $47.5 billion. In addition, the servicer will be providing private label services to HSBC and has established a third servicing site located in Amherst, NY with an additional 265 full time equivalent staff to complement this partnership arrangement.
PHH outsources various foreclosure quality control processes and late stage collection call functions to an offshore provider; however, the servicer indicated that no process is 100% offshored.
Finally, the ratings also 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 is likely to be mandated by regulators and other parties.
PHH Mortgage is headquartered in Mt. Laurel, NJ with site locations in Jacksonville, FL and the recently established Amherst, NY. As of June 30, 2013, the company primary serviced 793,534 loans totaling $130.8 billion and subserviced 472,536 loans for $97.8 billion for a combined portfolio of 1,266,070 mortgage loans totaling $228.6 billion. This includes Prime - 75,094 loans totaling $42.4 billion; Alt-A - 12,792 loans totaling $3.06 billion; HELOC - 87,770 loans totaling $6.1 billion, and 961,327 Agency loans totaling $146.8 billion.
The Outlook for U.S. Residential Mortgage Servicer ratings sector 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 website at 'www.fitchratings.com'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Rating 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 Criteria
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