Fitch: Servicer Concentration Could Pressure U.S. RMBS

Link to Fitch Ratings' Report: Shifting PLS Servicing Landscape Poses Risks
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=773588

The rapid growth of several U.S. mortgage servicers means that a small group of entities control the vast majority of legacy loans in need of a workout, which could present risks for some private label RMBS, according to Fitch Ratings in a new report.

Non-agency mortgage servicing is concentrated among a small number of entities. In fact, the top five servicers in this sector, Ocwen, Nationstar, Bank of America, JPM Chase and Select Portfolio Servicing together service approximately 75% of all non-agency RMBS. Where future problems may rest are with lower-rated or non-rated non-bank servicers, according to Managing Director Roelof Slump.

'Non-bank servicers have grown significantly through the sale and transfer of difficult to service loans from large banking institutions, said Slump. 'However, while non-bank servicers typically offer specialization which is important for this critical function, they are generally not as well-capitalized as the banks and this could increase servicer disruption/continuity risk among lower-rated companies with unique business strategies.'

In fact, Fitch has taken negative rating actions on a number of RMBS transactions over the past 24 months due to a higher risk of a servicer disruption among some of these companies.

The biggest risk to a mortgage investor from a servicer default is a disruption in 'servicing continuity', or when the daily servicing of a collateral pool is temporary interrupted. 'Until a new servicer is put in place to manage the loan, investors are at risk that pool delinquencies increase and trust cash flows are disrupted,' said Slump. This becomes more of a problem with very large higher risk portfolios that require more extensive servicing processes.

'Shifting PLS Servicing Landscape Poses Risks' is available at 'www.fitchratings.com' or by clicking on the above link.

Additional information is available at 'www.fitchratings.com'.

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