NEW YORK--(BUSINESS WIRE)--Link to Fitch Ratings' Report: Exposure Limited for U.S. RMBS EODs Tied to Servicer Ratings
The number of U.S. RMBS transactions likely to experience servicer Events of Default (EOD) due to servicer rating changes is marginal, according to Fitch Ratings.
Fitch conducted a review of transaction documents for approximately 450 U.S. RMBS transactions. The transactions selected represent an indicative sample across issuers, sectors and vintages. A list of the transactions reviewed by Fitch and a summary of findings can be found on Fitch's website by performing a title search for 'U.S. RMBS Servicer Event of Default Sample (2015 Q1)' or by clicking the link.
In addition to standard servicer EOD conditions related to financial condition and contractual obligations, Fitch found less than 10% of transactions reviewed included a servicer EOD tied to a specific servicer rating by a rating agency. More commonly, servicer EODs were tied to collateral performance triggers (25%) and GSE approval (17%).
Typically in an EOD, the trustee may, or at the direction of bondholders representing a certain percentage of voting rights, terminate the servicer and appoint a replacement. Historically, servicer EODs have not resulted in significant numbers of servicing transfers due to obstacles in obtaining the appropriate voting rights and due to potential cash flow disruptions risks related to servicing transfers.
The issue has received increased focus of late due to negative pressure on the servicer rating of Ocwen Loan Servicing (Ocwen), the largest servicer of non-agency U.S. RMBS loans. Fitch's RMBS primary servicer rating of 'RPS3' for Ocwen is currently on Rating Watch Negative.
Additional information is available at 'www.fitchratings.com'.