U.S. Residential Mortgage Servicer Rating Action
New York, January 25, 2012 -- Moody's Investors Service has upgraded the servicer quality ("SQ")
rating of PNC Bank N.A., PNC Lending Services Division
("PNC Lending Services" or "Division"), the Primary
Servicer of 2nd lien loans, to SQ2 from SQ2-. The
rating is based on above average collections, loss mitigation and
servicing stability assessments.
This rating action applies to both third-party HELOCs and closed-end
second lien loans serviced by PNC Lending Services. This rating
does not apply to the servicing operations of PNC Consumer Services,
an affiliate servicing division of PNC Bank N.A. for which
Moody's maintains a separate SQ rating.
As of December 31, 2011, PNC Lending Services' servicing portfolio
consisted primarily of 53,606 home equity lines of credit (HELOCs)
and 2,725 closed-end second lien loans for an unpaid principal
balance of approximately $4 billion. PNC Lending Services'
third-party servicing represents approximately 14% of the
Division's total servicing portfolio. This rating applies
only to third-party servicing conducted by PNC Lending Services.
Moody's views PNC Lending Services' collections abilities and loss mitigation
results as above average. The Division exhibited year-over-year
improvement in its collection performance metrics. However,
PNC Lending Services continued to be challenged by abandonment rate spikes
in its call center between August and October 2010 related to its integration
into PNC Bank, and again in December 2011 related to a seasonal
increase in the volume of calls.
We increased the Division's loss mitigation assessment to above
average from average during this review. PNC Lending Services demonstrated
an improvement in its loss mitigation performance from the prior review,
and continues to build out its loss mitigation group. The division
continued to expand its loan modification efforts during this review,
with all customer-facing functions charged with identifying loss
mitigation opportunities.
Moody's views PNC Lending Services' servicing stability as above average.
As a division of PNC Bank (rated A2, on positive outlook for senior
unsecured debt), PNC Lending Services also benefits from access
to resources and support services of a highly-rated institution.
PNC Bank N.A. is a wholly-owned subsidiary of PNC
Financial Services Group, Inc. (rated A3, on positive
outlook for senior unsecured debt). PNC is near completion of a
phased integration of National City Bank's servicing operations,
with management and most systems of the two servicing organizations already
merged, and call center integration scheduled for 2012.
The previous rating action for PNC Lending Services' SQ rating occurred
on July 2, 2010. At that time, Moody's affirmed the
company's rating as a Primary Servicer of second lien loans at SQ2-.
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 management. 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 increasing the 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.
The other methodology used in this rating 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 rating are described in "Updated Moody's Servicer
Quality Rating Scale and Definitions" published in May 2005.
REGULATORY DISCLOSURES
Moody's considers the quality of information available on the rated entity,
obligation or credit satisfactory for the purposes of issuing a rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a rating is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
third-party sources. However, Moody's is not an auditor
and cannot in every instance independently verify or validate information
received in the rating process.
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.
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
William 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 Upgrades PNC Bank N.A., PNC Lending Services Division's Rating to SQ2
