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Fitch Affirms Ocwen's Small Balance Commercial Servicer Ratings

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed Ocwen Loan Servicing, LLC's (Ocwen) small balance commercial servicer ratings as follows:

--Small Balance Primary servicer rating at 'SBPS2-'; Outlook Negative;

--Small Balance Special servicer rating at 'SBSS2-'; Outlook Negative.

The small balance commercial servicer ratings reflect Ocwen's highly integrated technology environment, robust investor and borrower websites, and strong management team, and experienced small balance commercial servicing staff. However, the servicer ratings also reflect the company's aggressive growth in the residential servicing space, and the company's financial condition. Ocwen is rated 'B' with a Negative Outlook by Fitch.

Fitch also rates Ocwen 'RPS3' as a residential mortgage servicer for primary servicing of prime, Alt-A, subprime, HELOC, and closed-end 2nd lien products, and 'RSS3' for special servicing. The Outlook for the residential servicer ratings is Negative. In addition, Fitch rates Ocwen 'CSS2-' as a commercial mortgage servicer for special servicing.

Ocwen's small balance commercial servicing operation shares senior management with the company's large balance commercial mortgage servicing operation, and continues to leverage both the company's residential and large balance commercial mortgage servicing operations. Most loan administration functions are performed by the residential servicing operation utilizing the REALServicing system, global servicing sites, interactive voice response system (IVR), and borrower and investor websites. Ocwen's large balance commercial servicing operation supports the small balance commercial servicing operation with its special servicing, valuations, and default services teams in West Palm Beach, FL; and back office support located in India that reconciles the annual business operating statements, orders property valuations, collects and analyzes financial information on REO properties, and processes work orders for REO property management. Ocwen stated that all collections and asset management functions for small balance commercial servicing are performed on-shore.

As of Dec. 31, 2013, Ocwen serviced a small balance commercial portfolio of 6,120 loans totaling $2.6 billion. This included primary servicing 3,030 loans totaling $1.3 billion, special servicing 893 loans and REO assets totaling $394 million, and subservicing 2,197 loans totaling $876 million. In August 2013, Ocwen began subservicing approximately 2,000 loans totaling $789 million secured by small balance commercial properties located in Puerto Rico. In October 2013, Ocwen boarded an initial transfer of 119 loans totaling $52 million from a new small balance commercial loan origination flow agreement. At the time of Fitch's review, the small balance commercial servicing collection department had a staff of 59 full time equivalent (FTE) employees, with 46 FTEs located in Houston TX and West Palm Beach FL and 13 FTEs located in India.

The Negative Outlook reflects concerns regarding the company's ongoing integration of recently acquired residential servicing portfolios and platforms. While completing the integration of Homeward Residential in the first quarter of 2013 which included approximately 300,700 loans totaling $55.6 billion, Ocwen acquired from bankruptcy the much larger residential servicing platform previously used by GMAC Mortgage in February 2013. The GMAC Mortgage acquisition included approximately 1.7 million loans totaling $269.1 billion. In addition, during third quarter of 2013, Ocwen acquired mortgage servicing assets for approximately 350,000 loans totaling $82.5 billion from IndyMac Mortgage Services, a division of OneWest Bank, FSB and 45,000 loans totaling $500 million from Greenpoint Mortgage Funding, Inc. Most of these acquisitions contain a significant amount of subprime loans with a high default risk.

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

Applicable Criteria and Related Research:

--'Rating Criteria for Structured Finance Servicers' (Feb. 6, 2013);

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

Applicable Criteria and Related Research:

Rating Criteria for Structured Finance Servicers -- Effective February 6, 2013 to January 30, 2014

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

U.S. Residential and Small Balance Commercial Mortgage Servicer Rating Criteria -- Effective January 31, 2011 to January 30, 2014

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

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=837205

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Contacts

Fitch Ratings, Inc.
Primary Analyst
Thomas Crowe, +1-212-908-0227
Senior Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Roelof Slump, +1-212-908-0705
Managing Director
or
Committee Chairperson
Grant Bailey, +1-212-908-0544
Managing Director
or
Media Relations
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com