Fitch Affirms Chase's U.S. Residential Servicer Ratings; Removes Outlook Negative

NEW YORK--()--Fitch Ratings has taken the following rating actions on the U.S. residential servicer ratings for JPMorgan Chase Bank, NA (Chase):

--Residential primary servicer rating for Prime product affirmed at 'RPS2+', removed from Outlook Negative, assigned Outlook Stable;

--Residential primary servicer rating for Alt-A product affirmed at 'RPS2+', removed from Outlook Negative, assigned Outlook Stable;

--Residential primary servicer rating for Subprime product affirmed at 'RPS2+', removed from Outlook Negative, assigned Outlook Stable;

--Residential primary servicer rating for HELOC product affirmed at 'RPS2+', removed from Outlook Negative, assigned Outlook Stable;

--Residential primary specialty servicer rating for Second Lien product affirmed at 'RPS2+', removed from Outlook Negative, assigned Outlook Stable;

--Residential primary specialty servicer rating for Option ARM product affirmed at 'RPS2+', removed from Outlook Negative, assigned Outlook Stable;

--Residential special servicer affirmed at 'RSS2+', removed from Outlook Negative, assigned Outlook Stable;

--Residential master servicer affirmed at 'RMS2', removed from Outlook Negative, assigned Outlook Stable.

The primary and special servicer rating actions reflect continued enhancements to Chase's internal control environment, investments in servicing technology, and improved internal audit and Reg AB results. The master servicing rating action reflects Chase's established master servicing platform and effective servicer oversight and investor reporting capabilities. All of the servicer ratings incorporate the company's financial condition. Chase is rated 'A+' with a Stable Outlook by Fitch. A company's financial condition is a component of Fitch's servicer rating analysis.

Finally, the ratings also incorporate 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, mandated by regulators and other parties.

Chase has resolved most of the issues identified by internal audits at the time of Fitch's prior review, and audit reports for the current review period indicate a significant decrease in material findings. In addition, Fitch reviewed Chase's Reg AB reports which contained two instances of material non-compliance for the primary and special servicing operations, a decrease from four from the prior year. The Reg AB reports did not contain any instances of material non-compliance for the master servicing operation, a decrease from two from the prior year. However, Chase remains under consent orders entered into with the Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System in 2011, and the National Mortgage Settlement (NMS) entered into in 2012. Chase stated that it had completed implementation of all servicing standards in accordance with the NMS by October 2012, and that it continues to report quarterly to the NMS's Department of Justice monitor on the required 29 servicing standard metrics.

As of June 30, 2013, Chase's mortgage servicing portfolio was comprised of over 7.3 million loans totaling $1.06 trillion, with 7.7% non-agency prime product, 1.7% Alt-A product, 3.9% subprime product, 17.7% HELOC product, and 2.5% closed-end second lien product by loan volume. Option ARMs made up 2.3% of the servicing portfolio. Chase's special servicing portfolio was comprised of over 26,000 loans totaling $2.3 billion and its master servicing portfolio was comprised of over 48,000 loans totaling $14.8 billion.

Chase continues to regularly update and enhance its servicing technology. Since the prior review, major projects included upgrading loss mitigation and foreclosure systems, and implementing speech analytics software.

Chase's master servicing operation performs monthly risk assessments and annual on-site reviews of its largest servicers. During 2013, the company completed four on-site reviews which covered 98% of the master servicing portfolio.

Fitch has reviewed Chase's servicing operations and believes the company continues to maintain a capable servicing operation with the staff, procedures, controls, default management processes, and technology to manage its current servicing portfolio. Fitch will continue to monitor the company's ability to maintain performance as it pursues its servicing initiatives in this high delinquency environment.

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'.

Applicable Criteria and Related Research:

--'Global Rating Criteria for Structured Finance Servicers' (Aug. 13, 2010);

--'U.S. Residential and Small Balance Commercial Mortgage Servicer Rating' (Jan. 31, 2011).

Applicable Criteria and Related Research:

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

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

Rating Criteria for Structured Finance Servicers

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=699690

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=812793

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Contacts

Fitch Ratings
Primary Analyst
Thomas Crowe, +1-212-908-0227
Senior Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Roelof Slump, +1-212-908-0705
Managing Director
or
Committee Chairperson
Vanessa Purwin, +1-212-908-0269
Senior 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 Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Roelof Slump, +1-212-908-0705
Managing Director
or
Committee Chairperson
Vanessa Purwin, +1-212-908-0269
Senior Director
or
Media Relations
Sandro Scenga, +1-212-908-0278 (New York)
sandro.scenga@fitchratings.com