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Announcement - Servicer:

Moody's Affirms Specialized Loan Servicing's SQ Assessments

Global Credit Research - 15 Feb 2013

U.S. Residential Mortgage Servicer Assessment Actions

New York, February 15, 2013 -- Moody's Investors Service has affirmed the servicer quality ("SQ") assessments of Specialized Loan Servicing, LLC ("SLS") at SQ3+ as a primary servicer of subprime residential mortgage loans and a Special Servicer of residential mortgage loans. We also affirmed SLS's SQ assessment as a primary servicer of second lien residential mortgage at SQ2-.

The subprime and special servicer assessments are based on the company's average subprime collection abilities, above average loss mitigation results, average foreclosure and REO timeline management and average servicing stability. The second lien assessment is based on the company's above average collection abilities, above average loss mitigation results, and average servicing stability.

The company's servicing portfolio totaled approximately 247 thousand loans for an unpaid principal of $28 billion (including $4.6 billion in recovery) as of 31 January 2013. SLS employed 1,075 servicing associates as of December 31, 2012.

SLS is a majority-owned subsidiary of Computershare Limited, a global financial services provider for the global securities industry. SLS operates servicing sites in Denver and Phoenix.

ASSESSMENT RATIONALE

We view the SLS's collection abilities for subprime as average and for second lien loans as above average. While the company makes wide use of modifications for both subprime loans and second lien loans in the early stages of delinquency, its collection roll rates for later stages of delinquency were not as strong as many of its peers.

We assess the company's loss mitigation for subprime and second lien loans as above average. SLS utilizes a comprehensive, proprietary system for evaluating loss mitigation options. The company also demonstrated solid performance of its modifications, and is proactive in its pursuit of short sales.

We view the company's foreclosure and REO timeline management as average. Since the prior review, SLS added depth to management of its foreclosure timeline group. While the company's overall default timelines were solid, the REO timelines continued to be elevated relative to peers.

We assess SLS as average for servicing stability. The company's portfolio continues to experience modest, manageable growth. Since the prior review, the company opened a second servicing site in Phoenix in December 2012. The site is staffed with 50 servicing associates who are tasked primarily with call center functions.

The previous assessment action for SLS's SQ assessments occurred on 20 December 2011. At that time, we upgraded SLS's SQ assessments to SQ3+ from SQ3 as a primary servicer of subprime residential mortgage loans and as Special Servicer. We also upgraded the company's SQ assessment as a primary servicer of second lien residential mortgage loans to SQ2- from SQ3.

Moody's SQ assessments represent its view of a servicer's ability to prevent or mitigate asset pool losses across changing markets. The assessment scale ranges from SQ1 (strong) to SQ5 (weak). Where appropriate, a "+" or "-" modifier will be appended to the relevant assessment to indicate a servicer's relative servicing quality within a particular category. Moody's servicer assessments are differentiated in the marketplace by focusing on performance management. SQ assessments for U.S. residential mortgage servicers incorporate assessments of delinquency transition rates, foreclosure timeline management, loan cure rates, recoveries, loan resolution outcomes, and REO management -- all critical indicators of a servicer's ability to maximize returns from mortgage portfolios.

Moody's servicer assessments also consider the company's ability to maintain its focus on high quality servicing in an economic downturn. Servicing operations can be stressed by increasing the number of delinquent loans while at the same time increasing the need for liquidity. The SQ assessment reflects our expectation of the impact that the servicing will have on the on-going credit performance of the portfolio. For this reason, Moody's monitors SQ assessments based on periodic information provided by servicers and conducts a formal re-evaluation of its servicer assessments annually.

The principal methodology used in this assessment was "Moody's Approach to Rating Residential Mortgage Servicers" published in January 2001. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Other Factors used in this assessment are described in "Updated Moody's Servicer Quality Rating Scale and Definitions" published in May 2005.

REGULATORY DISCLOSURES

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on

www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Gene Berman
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

William E Fricke
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Affirms Specialized Loan Servicing's SQ Assessments
No Related Data.

 

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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