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Fitch Affirms Popular Mortgage Servicing's US Residential Subprime Servicer Rating at 'RPS2-'
NEW YORK-(Business Wire)-September 5, 2008 - Fitch Ratings takes the following rating action on Popular Mortgage Servicing Inc.'s (PMSI) U.S. residential primary servicer rating:
—Residential primary servicer rating for subprime product affirmed at 'RPS2-'.
The rating action is based on PMSI's established loan administration and default management practices, continued technology improvements, and financial condition of its parent, Popular, Inc. (rated 'A-/F2' Outlook Negative by Fitch).
PMSI is located in Cherry Hill, NJ, with corporate offices in Marlton, NJ. PMSI's senior management team averages over 25 years of industry experience, including seven years with the company. PMSI continues to improve its servicing technology. Since Fitch's prior review, the company completed the implementation of call recording with screen capture software in its customer service and collections departments. The call recording software is being utilized for compliance monitoring as well as staff scheduling, performance reviews, and to identify training opportunities. As of Jan. 31, 2008, PMSI serviced over 82,600 loans totaling over $11.6 billion. In an announcement dated Aug. 28, 2008, Popular, Inc. indicated that it has agreed to sell approximately $1.17 billion in loans and mortgage servicing assets to various Goldman Sachs affiliates.
As with other subprime servicers, PMSI is experiencing a substantial increase in delinquencies, and this will continue to put stress on the servicing operation. Since Fitch's prior review, the amount of delinquent loans, foreclosures and real estate owned (REO) properties in PMSI's servicing portfolio has increased significantly. As of Jan. 31, 2008, total delinquencies including loans 30 days delinquent through REO increased to 29.5% of the portfolio from 13.8% at Jan. 31, 2007, based on loan count. As a result, the company continues to experience a high average call hold time of 61.6 seconds and an average abandonment rate of 6.04% in its collections department. However, to help address these volumes, PMSI has expanded its use of temporary employees in the collections department under a 'temp to hire' program and has reassigned underwriting staff from its retention department to assist in underwriting loan modifications.
Fitch has reviewed the company's servicing operations and believes that PMSI has the infrastructure and technology to support its current servicing portfolio. However, Fitch will continue to monitor PMSI's ability to manage the significant increase in delinquencies in its portfolio as it pursues its servicing initiatives.
Fitch rates residential mortgage primary, master, and special servicers on a scale of 1 to 5, with 1 being the highest rating. Within some 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 Mortgage Servicers,' dated Nov. 29, 2006, which is available on the Fitch Ratings web site at www.fitchratings.com.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
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