Fitch Affirms Nationstar's U.S. RMBS Servicer Ratings

NEW YORK--()--Fitch Ratings has affirmed the following U.S. residential servicer ratings for Nationstar Mortgage LLC (Nationstar):

--Residential primary servicer rating for Alt-A product affirmed at 'RPS3+'; Outlook Stable;

--Residential primary servicer rating for subprime product affirmed at 'RPS3+'; Outlook Stable;

--Residential special servicer rating affirmed at 'RSS3+'; Outlook Stable;

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

The affirmation of the primary and special servicer ratings and the Stable Outlook reflect operational and technology enhancements, and continued improvements to its internal control environment. The affirmation of the master servicer rating and the Stable Outlook reflect established controls and processes, effective use of technology, 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 is the largest non-bank servicer, and fourth largest servicer overall, of residential mortgage loans in the U.S. As of June 30, 2016, Nationstar's primary and special residential forward mortgage servicing portfolio was comprised of over 2.1 million loans totaling $338.1 billion. This included approximately 132,000 Alt-A loans totaling $31.7 billion and 235,000 first and second lien subprime loans totaling $28.2 billion.

Nationstar's primary and special servicing operation is headquartered in Dallas TX, with additional servicing sites in Chandler AZ and Greenwood Village CO. Nationstar utilizes a vendor in the Philippines for approximately 74% of its customer service representative FTEs and 51% of its collections FTEs. Nationstar also utilizes a vendor in India to handle a significant portion of non-customer facing functions.

During the current review period, Nationstar's primary and special servicing operation implemented a number of enhancements, including to its borrower communication, document management, loan administration, and default management areas. In addition, the company continues to invest in information technology to support its servicing operations. Technology enhancements during the current review period included cash processing systems; a new workflow scripting application for collections and loss mitigation, a new investor reporting system; and several projects to support changes to bankruptcy processing.

Nationstar's internal audit process and overall internal control environment continues to mature. During the current review period, the company significantly increased the number of tests performed by its first line of defense, enhanced its call monitoring capability, and expanded its internal audit staff and processes. The Reg AB report for the primary and special servicing operation for the year ended Dec. 31, 2015 had no instances of material non-compliance, and the USAP report for the year ended Dec. 31, 2015 also had no material findings.

Nationstar is the second-largest master servicer of U.S. residential mortgage loans, with a portfolio of over 280,000 loans totaling $57 billion. The master servicing operation was acquired from Aurora Bank FSB (Aurora) in July 2012, and continued with minimal staffing changes to leverage the management, staff, technology, and processes that were acquired from Aurora. Master servicing does not utilize any offshore resources. The company oversees 33 primary servicers and subservicers. Nationstar has taken on master servicing responsibilities for new RMBS, and remains engaged in new and developing industry initiatives.

Nationstar's master servicing operation has demonstrated effective control processes leveraging the SBO2000 servicing system and several ancillary systems which are used for file uploads, default monitoring, and an investor web portal. In the Reg AB report for the year ended Dec. 31, 2015 for master servicing, there were no instances of material noncompliance. During the current review period, master servicing performed eight onsite servicer reviews, which covered approximately 98% of its portfolio.

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. 01 Jul 2016)

https://www.fitchratings.com/site/re/884140

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

https://www.fitchratings.com/site/re/864368

Additional Disclosures

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1012840

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, +1 212-908-0278
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, +1 212-908-0278
sandro.scenga@fitchratings.com