U.S. Residential Mortgage Servicer Rating Actions
New York, November 04, 2011 -- Moody's Investors Service has downgraded Litton Loan Servicing LP's
("Litton") servicer quality (SQ) ratings as follows:
To SQ3 from SQ2+ as Primary Servicer of subprime residential mortgage
loans
To SQ3 from SQ2+ as a Special Servicer of residential mortgage loans
To SQ3+ from SQ2+ as Primary Servicer of 2nd lien residential
mortgage loans
Moody's also has removed all of the company's SQ ratings from
review for downgrade and has withdrawn the ratings.
The downgrade is driven by deterioration in Litton's collections
and loss mitigation performance relative to peers, as well as the
change in the company's ownership to a fundamentally weaker corporate
parent and the significant downsizing of its servicing operations.
As part of this rating action, we lowered the collections assessments
for all of Litton's SQ ratings to average from above average,
and the loss mitigation assessment for the 2nd lien loans SQ rating to
above average from strong. We also have lowered the servicer stability
assessment for all of the company's SQ ratings to below average
from average.
Moody's has removed all of the SQ ratings from review for downgrade
and has withdrawn the ratings because the company has been re-organized
and, beginning November 1, 2011, performs only limited
functions of a Primary Servicer. Please refer to Moody's
Withdrawal Policy on moodys.com
In a transaction that closed on September 1, 2011, Ocwen Financial
Corp. (B1) acquired the loans and servicing platform of Litton
Loan Servicing LP from The Goldman Sachs Group, Inc. (A1,
negative outlook). Litton operates as a wholly-owned subsidiary
of Ocwen Financial.
The previous rating action for Litton's SQ ratings occurred on March
28, 2011. At that time, we placed an additional review
for downgrade on the company's SQ2+ ratings as Primary Servicer
of subprime residential mortgage loans, Primary Servicer of 2nd
lien residential mortgage loans and as a Special Servicer of residential
loans due to the announcement that Goldman Sachs was seeking a potential
sale of Litton. We also lowered the servicer stability assessment
for these ratings to below average from average.
Moody's analyzes and monitors Litton using the rating methodology
described in "Moody's Approach to Rating Residential Mortgage
Servicers" (January 2001) and "Updated Moody's Servicer Quality
Rating Scale and Definitions" (May 2005). A detailed description
of the methodologies can be found on Moody's website: www.moodys.com.
In addition, Moody's publishes a weekly summary of structured
finance credit, ratings and methodologies, available to all
users of our website, at www.moodys.com/SFQuickCheck.
Moody's SQ ratings represent its view of a servicer's ability to prevent
or mitigate asset pool losses across changing markets. The rating
scale ranges from SQ1 (strong) to SQ5 (weak). Where appropriate,
a "+" or "-" modifier will be appended to the relevant rating
to indicate a servicer's relative servicing quality within a particular
category. Moody's servicer ratings are differentiated in the marketplace
by focusing on performance measurement. SQ ratings 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 ratings also consider the company's ability to maintain
its focus on high quality servicing in an economic downturn. Servicing
operations can be stressed by the increasing number of delinquent loans
while at the same time increasing the need for liquidity. The SQ
rating 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 ratings based on periodic information
provided by servicers and conducts a formal re-evaluation of its
servicer ratings annually.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
entities that hold ratings from MIS that have also publicly reported to
the SEC an ownership interest in MCO of more than 5%. A
member of the board of directors of this rated entity may also be a member
of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
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
Linda Stesney
MD - Structured Finance
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 Downgrades and Withdraws Litton's SQ Ratings