Fitch Affirms The Bank of New York Mellon's U.S. RMBS Master Servicer Rating; Assigns Stable Outlook
Fitch Ratings affirms The Bank of New York Mellon (BNY Mellon) U.S. residential master servicer rating at 'RMS1'. The Rating Outlook is Stable.
The master servicer rating affirmation and assignment of a Stable Rating Outlook reflects BNY Mellon's strengthened master servicing capabilities and increased oversight functionalities. The master servicer increased coverage with two back-up servicers capable of providing default special servicing, if needed and enhanced the scope and frequency of their servicer review process covering consent orders, the Attorneys General and consumer financial protection bureau settlement requirements, including the primary servicer's loss mitigation and modification decisions.
In addition, the rating action reflects the financial strength of its parent The Bank of New York Mellon which is rated 'AA-/F1+' with a Stable Outlook by Fitch. Additional information on the parent is available at 'www.fitchratings.com'. The ratings were determined in accordance with Fitch's criteria 'U.S. Residential and Small Balance Commercial Mortgage Servicer Rating' (Jan 31, 2011).
During the period under review, the master servicing operations transitioned from Corporate Trust (CT) to global operations and technology management to provide stronger oversight. The CT control group that manages the compliance requirements is not part of the master servicing business and reports independently to the bank's senior management. In addition, the business operations manager who has been with BNY Mellon since 2007 was promoted to the master servicing manager's position upon the prior manager's departure in September 2011.
For the period ended Dec. 31, 2011, BNY Mellon's external auditors reported that the master servicing platform had two instances of Regulation AB non-compliance. The master servicer attributed the items to their master servicing system's modeling update process. The two incidents occurred in one month and BNY Mellon made the necessary changes and instituted new controls in the following month that remedied the problems.
BNY Mellon's master servicing is headquartered in New Albany, OH with a second location in Pittsburgh, PA. This site also provides additional back-up capacity for its business operation. As of June 30, 2012, BNYM master serviced 57,667 loans totaling $10.1 billion, which included 56,463 non-agency RMBS loans totaling $9.6 billion and 1,205 other loans totaling $475 million.
Fitch believes BNY Mellon's master servicing platform has the requisite controls and capacity to increase its master servicing capabilities while effectively maintaining oversight of its primary servicers in a high default 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 Servicers', dated Nov. 29, 2006 and 'Global Rating Criteria for Structured Finance Servicers' 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:
Global Rating Criteria for Structured Finance Servicers
U.S. Residential and Small Balance Commercial Mortgage Servicer Rating Criteria
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