Fitch Affirms Nationstar's U.S. RMBS Servicer Ratings; Outlook Stable

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

--Residential primary servicer rating for Alt-A product affirmed at 'RPS3+', Outlook revised to Stable from Negative;

--Residential primary servicer rating for subprime product affirmed at 'RPS3+', Outlook revised to Stable from Negative;

--Residential special servicer rating affirmed at 'RSS3+', Outlook revised to Stable from Negative;

--Residential master servicer affirmed at 'RMS2', Outlook Stable.

The affirmation of the primary and special servicer ratings and revision of the Rating Outlook to Stable from Negative reflects improved Regulation AB (Reg AB) results, continued operational and internal control enhancements, and moderation in portfolio growth. The primary and special servicer ratings also incorporate internal audit findings during the current review period.

The affirmation of the master servicer rating and Outlook Stable reflects the company's seasoned platform, established controls and processes, continued operational enhancements, and experienced management and staff.

All of the servicer ratings incorporate the company's financial condition. Fitch does not publicly rate the credit and financial strength of Nationstar or its parent company, Nationstar Mortgage Holdings, Inc. However, Fitch's Financial Institutions group reviewed Nationstar's financial statements to provide an internal assessment, as financial condition is a component of Fitch's servicer rating process.

Nationstar's primary and special servicing operation is the largest non-bank servicer, and fourth largest servicer overall, of residential mortgage loans in the U.S. After a period of aggressive growth that included boarding approximately 1,100,000 residential loans totaling $163 billion acquired from Bank of America in 2013, Nationstar's portfolio growth has moderated over the recent term, allowing the company to focus on operational and control enhancements.

Nationstar's Reg AB report for the primary and special servicing operation for the year ended Dec. 31, 2014 did not contain any instances of material non-compliance, a decrease from one last year. During the current review period, Nationstar implemented enhancements in a number of operational areas including loan acquisitions, customer communication, complaint management, escrow administration, cash processing, and default management. Nationstar also continues to enhance its internal control environment, with improvements to its quality assurance program, call monitoring, and internal audit program.

Internal audit reports reviewed by Fitch for the primary and special servicing operations for the current review period contained a number of findings, which although not explicitly risk rated as to severity, had a negative impact on the assessment of the operational areas involved.

Nationstar's primary and special servicing operation is headquartered in Dallas TX, with additional servicing sites in Chandler AZ and Greenwood Village CO. Since Fitch's prior review, Nationstar exited its Scottsbluff NE site. Nationstar utilizes a vendor in the Philippines for approximately 70% of its customer service representative FTEs and 50% of its collections FTEs. Nationstar also utilizes a vendor in India to handle a significant portion of non-customer facing functions. As of Sept. 30, 2015, Nationstar's primary and special residential forward mortgage servicing portfolio was comprised of over 2.2 million loans totaling $356.4 billion. This included approximately 152,000 Alt-A loans totaling $36.6 billion and 260,000 first and second lien subprime loans totaling $31.3 billion.

Nationstar's master servicing operation is the second largest master servicer of residential mortgage loans in the U.S., with a portfolio of over 300,000 loans and 460 non-agency RMBS transactions. The company oversees 31 primary and subservicers. Nationstar was engaged as master servicer on six new private securitizations in 2014 and 2015 year to date. In addition, the company acquired master servicing of nine existing securitizations in December 2014.

The majority of the management and staff in master servicing has extensive industry and company experience, and worked together for a significant period of time including at a predecessor company, Aurora Bank FSB. Since Fitch's prior review, Nationstar's master servicing operation was re-aligned under the executive vice president of servicing. At the time of Fitch's prior review, master servicing reported to the head of the performing servicing area in the primary and special servicing operations.

Nationstar master servicing has strong controls over processes, leveraging the SBO2000 servicing system and several ancillary systems. In the Reg AB report for the year ended Dec. 31, 2014 for master servicing, there were no instances of material noncompliance, which is consistent with prior review periods. During the current review period, master servicing performed seven on-site servicer reviews, which covered approximately 94% of its portfolio. In addition, master servicing completed five desk reviews.

Nationstar continues to enhance its master servicing operational capabilities. During the current review period, the company focused on default timeline processes, controls around MI, and on-site reviews.

Nationstar master servicing is located in Greenwood Village CO and does not utilize any off-shore resources. As of Sept. 30, 2015, the residential master servicing portfolio was comprised of over 300,000 loans totaling $62.8 billion.

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 April 23, 2015 which is available on the Fitch Ratings web site at 'www.fitchratings.com'.

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

Applicable Criteria

Rating Criteria for Structured Finance Servicers (pub. 23 Apr 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864375

Rating Criteria for U.S. Residential and Small Balance Commercial Mortgage Servicers (pub. 23 Apr 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864368

Additional Disclosures

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=994352

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analyst
Thomas Crowe
Senior Director
+1-212-908-0227
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Natasha Aikins
Director
+1-212-908-0272
or
Committee Chairperson
Roelof Slump
Managing Director
+1-212-908-0705
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Thomas Crowe
Senior Director
+1-212-908-0227
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Natasha Aikins
Director
+1-212-908-0272
or
Committee Chairperson
Roelof Slump
Managing Director
+1-212-908-0705
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: sandro.scenga@fitchratings.com