Fitch Affirms Nationstar's U.S. Resi Subprime Svcr Rtg; Assigns Alt-A, Special & Master Svcr Rtgs

NEW YORK--()--Fitch Ratings has taken the following rating actions for Nationstar Mortgage LLC's (Nationstar) U.S. residential servicer ratings:

--Residential primary servicer rating for subprime product affirmed at 'RPS2', assigned Outlook Stable;

--Residential primary servicer rating for Alt-A product assigned 'RPS2', Outlook Stable;

--Residential special servicer rating assigned 'RSS2', Outlook Stable;

--Residential master servicer assigned 'RMS2+', Outlook Stable.

The rating actions are based on Nationstar's effective default performance, comprehensive servicing technology, and experienced servicing management team. However, the ratings also take into account Nationstar's aggressive portfolio growth and the procedural deficiencies that were contained in the most recent Regulation AB report for Nationstar for the year ended Dec. 31, 2011, which have been addressed by the company.

The master servicer rating reflects the established master servicing platform that Nationstar acquired from Aurora Bank FSB (Aurora). In addition, all of the servicer ratings incorporate the financial condition of Nationstar's majority owner, a Fortress Investment Group company. Fortress Investment Group is rated 'BBB'; Outlook Stable by Fitch.

Finally, the ratings reflect Fitch's overall concerns for the U.S. residential servicing industry, which 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.

Nationstar is headquartered in Lewisville, TX, with additional servicing sites in Houston, TX, Scottsbluff, NE, Indianapolis, IN, and Littleton, CO. As of June 30, 2012, Nationstar's primary and special servicing portfolio was comprised of over 600,000 loans totaling $99.2 billion, a substantial increase from 397,000 loans totaling $65.7 billion as of June 30, 2011. The primary and special servicing portfolio included over 89,000 first and second lien subprime loans totaling $13.6 billion and 45,000 Alt-A loans totaling $12 billion, with over 263,000 loans totaling $46.6 billion in special servicing. The master servicing portfolio was comprised of over 477,000 loans totaling $117.3 billion.

Since Fitch's prior review, Nationstar completed its acquisition of Aurora's residential mortgage servicing platform and continues its integration of Aurora's servicing sites in Scottsbluff, Indianapolis, and Littleton. The master servicing operation has remained in Littleton with the same management, staff, technology, and policies and procedures. Fitch views this positively as the master servicing operation was effective and well-managed prior to its acquisition by Nationstar.

In August 2011, Nationstar became the subservicer of the First Tennessee Bank mortgage portfolio which was previously subserviced by MetLife Home Loans (MLHL). MLHL's parent, MetLife Bank, NA, is under a consent order with the office of the Comptroller of the Currency (OCC). In addition, Aurora is under a consent order with the Office of Thrift Supervision (now part of the OCC). Nationstar indicated that it continues to work indirectly with the OCC to comply with the consent order requirements. The company implemented a single point of contact program and developed a servicing oversight control program that performs over 100 independent quality control tests that monitor ongoing compliance with the consent order requirements.

In addition, Nationstar continues to build its internal audit program. The company hired a new director of internal audit in October 2011, and completed an audit risk assessment, initial audit plan, and staffing model. The initial audit plan includes all high risk areas in servicing within the first 18 months. In the meantime, the company continues to rely on its robust quality control and compliance functions.

Fitch has reviewed Nationstar's servicing operations and believes the company has the management, infrastructure, and technology to support its current servicing portfolio. Fitch will continue to monitor Nationstar's ability to maintain its operational 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:

Global Rating Criteria for Structured Finance Servicers

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547305

U.S. Residential and Small Balance Commercial Mortgage Servicer Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=600065

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Contacts

Fitch Ratings
Primary Analyst
Thomas Crowe, +1 212-908-0227
Senior Director
Fitch, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Diane Pendley, +1 212-908-0777
Managing Director
or
Committee Chairperson
Grant Bailey, +1 212-908-0544
Managing Director
or
Media Relations
Sandro Scenga, +1 212-908-0278 (New York)
sandro.scenga@fitchratings.com

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Contacts

Fitch Ratings
Primary Analyst
Thomas Crowe, +1 212-908-0227
Senior Director
Fitch, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Diane Pendley, +1 212-908-0777
Managing Director
or
Committee Chairperson
Grant Bailey, +1 212-908-0544
Managing Director
or
Media Relations
Sandro Scenga, +1 212-908-0278 (New York)
sandro.scenga@fitchratings.com