NEW YORK--(BUSINESS WIRE)--Fitch Ratings has taken the following actions on the U.S. residential primary servicer ratings for Vericrest Financial, Inc (Vericrest), including assigning them a Stable Outlook:
--Primary servicer rating for sub-prime product affirmed at 'RPS2-', Outlook Stable;
--Special servicer rating affirmed at 'RSS2-', Outlook Stable.
The servicer rating affirmations and Stable Outlook reflect Vericrest's continued positive performance, innovative customer-centric high-touch servicing environment and enhanced default servicing strategy. Proactive default efforts include modifications and focused short sales with defined teams to provide results.
However, during the review period, there have been management changes within several key senior positions, including hiring a new CEO, CIO and CAO. The CAO has prior tenure at Hudson Advisors, an affiliate, including overseeing the operational, organizational and financial build-out of Vericrest. The new leadership team is viewed positively, as they possess extensive industry knowledge.
The ratings also take into consideration the financial condition of Vericrest and its parent, both non-rated entities, as financial condition is a component of Fitch's servicer ratings. In addition, the rating reflects changes Fitch made to its servicer ratings category weighting, which was instituted for all forward mortgage servicers in 2011.
Finally, the ratings also 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 me mandated by regulators and other parties.
Vericrest is owned by Lone Star Funds' Lone Star Fund VI and is headquartered in Oklahoma City, OK. Founded in 1995, Lone Star Funds provides investor capital to the funds, while its affiliate company, Hudson Advisors, provides asset management services. Although Vericrest is Lone Star's sole residential servicer, it also services third party loans and has plans to further this offering.
As of March 31, 2012, Vericrest serviced 45,676 loans totaling $6.5 billion. The current portfolio contains approximately 39,049 subprime loans totaling $6.2 billion, 5,395 subprime closed-end second liens totaling $193.9 million and approximately 1,200 other loans totaling $111.7 million. Fitch will continue to monitor Vericrest's ability to manage its growth while maintaining performance in a changing mortgage servicing environment.
As part of Vericrest's focused default servicing, the company provides an innovative 'Vericrest Cares' program which is managed by an independent department focusing on the payment performance of borrowers who have received modified loans. The program has two focal points: to provide newly modified borrowers with support by making monthly payment reminder calls; and to aid existing modified borrowers, offering weekly counseling sessions to improve their credit score.
The servicer has instituted three distinct teams responsible for establishing early customer contact and validating borrower information, working with borrowers in foreclosure, and contacting borrowers who cannot be reached by performing skip tracing and field visits.
The U.S. Residential Mortgage Servicer ratings sector remains on Negative Outlook. 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:
U.S. Residential and Small Balance Commercial Mortgage Servicer Rating Criteria
Global Rating Criteria for Structured Finance Servicers