Latin America Residential Mortgage Master Servicer rating action
Mexico, March 25, 2013 -- Moody's de México S.A. de C.V. (Moody's)
has confirmed the SQ2- (SQ2 minus) qualitative assessment of Administradora
de Activos Financieros S.A. (Acfin) as a Master Servicer
of Residential Mortgage Loans in Mexico. Moody's assessment is
based on the company's Above Average reporting and remitting processes,
Above Average compliance and monitoring capabilities, and Average-
(Average minus) servicing stability.
Moody's had placed the assessment on review for possible downgrade
on November 23, 2011, citing concerns over ACFIN's role in
preparing collection reports as well as in supervising, reviewing
and verifying the collections information it receives from FOVISSSTE,
Fondo de la Vivienda del Instituto de Seguridad y Servicios Sociales de
los Trabajadores del Estado (FOVISSSTE) as the primary servicer in the
TFOVIS RMBS transactions in Mexico.
ASSESSMENT RATIONALE
Moody's confirmation of Acfin's assessment is based on the
fact that Acfin since then implemented procedures to contribute to timely
reporting from FOVISSSTE, to detect reporting inconsistencies and
to report them to relevant transaction parties.
Moody's SQ assessments are comprised by evaluations to different components
of the master servicer operations. Acfin´s SQ assessment
includes the following component evaluations:
REPORTING AND REMITTING
Moody's evaluation of Acfin's reporting and remitting is Above Average.
This is lower than the previous assessment of Above Average + (Above
Average plus).
Moody's believes that Acfin could have taken a more active role
in the TFOVIS RMBS transactions when a) monitoring compliance with the
instructions included in the transaction documents, and b) disclosing
the problems faced by Fovissste when generating periodic loan-level
information for securitized loans.
However, since 2012 Acfin has taken a proactive role in addressing
those issues. It has implemented and followed a calendar to receive
loan-level information from primary servicers, and it has
put in place policies and procedures in order to inform transaction parties
of delays or missing collections information from the primary servicers.
Acfin has also introduced mechanisms to confirm the primary servicer fee
amount and to correctly report collections received between the pool cut-off
and deal closing dates. In addition, Acfin has reinforced
its procedures to reconcile collection reports with funds remitted to
the trust accounts.
Moody's considers that Acfin's master servicing system complies
with best practice standards for the industry. Acfin's functional
proprietary system, Core, automatically uploads and reconciles
transactions for each loan of the mortgage portfolios under Acfin supervision.
The company is capable of replicating loan-level performance since
origination and its independent calculations are utilized to validate
the collections reported by the primary servicers.
Moody's expects that all recently implemented reporting and remitting
procedures continue to be systematically applied in the RMBS primary servicers
monitored by Acfin.
COMPLIANCE AND MONITORING
Moody's views Acfin as Above Average in compliance and monitoring capabilities.
Prior to starting master servicing operations, Acfin carries out
an in-depth assessment of the primary servicer's portfolio
management system, which includes a formal operational evaluation
as well as a comprehensive review of portfolio management policies and
procedures.
Starting in 2012 Acfin has implemented annual compliance on-site
reviews as well as monthly sampling and reviewing of loans from the TFOVIS
portfolios under supervision.
Day-to-day operations are controlled through an operating
manual, which is a tailor-made master servicer guideline.
The operating manual clearly establishes the templates and formatting
of the information that primary servicers must systematically report to
Acfin.
In addition, Acfin has hired a due diligence manager, which
is a positive development. This new position reinforces the process
of assessing primary servicers and will contribute to validate the instructions
included in the transaction documents.
In Moody's opinion, timely disclosure of action plans to remedy
Acfin's findings on primary servicer risks will add certainty to
its oversight operations.
SERVICING STABILITY
Moody's assessed Acfin's servicing stability as Average --
(Average minus).
The assessment reflects Moody's opinion on Acfin's servicing
stability when compared with other master servicers operating in Mexico,
which tend to be relatively small entities.
Acfin is a fully family owned company. It is focused on master
servicer operations in Chile and Mexico, and it has a small primary
servicer business line in Chile. Compared against other companies
rated by Moody's, Acfin's asset size and capital base continue to
be modest. As of the end of 2012, the company financials
showed consistent profitability and low leverage but limited capacity
to face stress situations.
Acfin's seasoned master servicing operation includes significant
experience in securitization and servicer transfers. The company
possesses an experienced top and middle management team with several years
of experience in the industry, which has been with the company for
at least 6 years. As of this Moody's review Acfin has added
3 full time employees focused on reporting and due diligence.
During 2011 and 2012 the company has improved internal processes by implementing
three new quality control tools and updating its operating manuals.
Acfin has a state-of-the-art site which includes
good accessibility and security standards. The company also subcontracts
a remote site as well as hosting services for the critical applications
and databases. During the year Acfin performs different tests to
its disaster recovery plan.
Moody's views as positive the introduction of three internal committees
on Quality, Information Tecnology and Safety. However it
would be important to include independent members to those recently established
committees.
THE COMPANY
Acfin is a master servicer based in Chile which also supervises primary
servicers in Mexico. The company supervises mortgage credit portfolios,
consumer loans, student loans, credit cards and receivables.
Acfin was established in 1997 in Santiago de Chile, Chile.
As of this Moody's review the company had 30 full-time associates
within its master servicing operation. Acfin oversees 20 primary
servicers in Chile as well as 5 primary servicers in Mexico.
In Mexico, Acfin is responsible for the reporting of 15 RMBS transactions
from Fondo de la Vivienda del Instituto de Seguridad y Servicios Sociales
de los Trabajadores del Estado (FOVISSSTE), 34 RMBS issuances from
Instituto del Fondo Nacional de la Vivienda para los Trabajadores (Infonavit)
and one private RMBS transaction. These transactions represent
884,624 loans for an outstanding amount of approximately USD 17
billion.
MOODY'S ASSESSMENTS
Moody's SQ assessments for master servicers represent its view of a master
servicer's ability to report primary servicers' activity to trustees or
investors and oversee the performance and reporting of underlying servicers.
Examples of duties a master servicer may perform include oversight of
loan accounting, loss mitigation, and REO functions.
The assessment scale ranges from SQ1 (strong) to SQ5 (weak), where
SQ2 is Above Average, SQ3 is Average, and SQ4 is Below Average.
An appropriate "+" or "-" modifier will be appended to the
relevant rating to indicate a servicer's relative servicing quality in
a particular category.
Moody's servicer assessments consider the company's ability to maintain
its focus on high quality servicing in an economic downturn. A
master servicer assessment is assigned with the understanding that a master
servicer's effectiveness can have an impact -- either positive
or negative -- on credit enhancement levels, particularly
with lower-rated securities. For this reason, Moody's
formally and periodically re-evaluates its servicer assessments.
Moody's master servicer assessments do not include Moody's opinion on
asset portfolios different from residential mortgage loans.
The methodology used in this rating was "Moody's Methodology for U.S.
RMBS Master Servicer Quality Ratings", published on April 2009.
Please see the Credit Policy page on www.moodys.com.mx
for a copy of this methodology.
REGULATORY DISCLOSURES
Information sources used to prepare the assessment are the following;
parties involved in the assessment, parties not involved in the
assessment, public information, confidential and proprietary
Moody's Investors Service information.
This assessment has been disclosed to the assessed entity prior to public
dissemination.
A general listing of the sources of information used in the assessment
process, and the structure and voting process for the rating committees
responsible for the assignment and monitoring of assessments can be found
in the Disclosure tab in www.moodys.com.mx.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this assessment action,
and whose ratings may change as a result of this assessment 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.
This assessment is subject to upgrade or downgrade based on future changes
in the operating, financial or any other relevant condition of the
master servicer, and said modifications will be made without Moody's
de Mexico S.A. de C.V. accepting any liability
as a result.
Moody's considers the quality of information available on the assessed
entity, obligation or credit satisfactory for the purposes of issuing
an assessment.
Moody's adopts all necessary measures so that the information it uses
in assigning an assessment 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 assessment process.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com.mx for further information
on the meaning of each assessment category and the definition of default
and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com.mx
for the last assessment action and the rating history. The date
on which some assessments and 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.mx for further information.
Please see www.moodys.com.mx for any updates on changes
to the lead analyst and to the Moody's legal entity that has issued the
assessment.
The assessments issued by Moody's de Mexico are opinions regarding the
quality of operations and are not a recommendation to invest in any security
and/or issuer.
Joel Sanchez
Analyst
Structured Finance Group
Moody's de Mexico S.A. de C.V
Ave. Paseo de las Palmas
No. 405 - 502
Col. Lomas de Chapultepec
Mexico, DF 11000
Mexico
JOURNALISTS: 001-888-779-5833
SUBSCRIBERS:52-55-1253-5700
Maria Muller
Senior Vice President/Manager
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's de Mexico S.A. de C.V
Ave. Paseo de las Palmas
No. 405 - 502
Col. Lomas de Chapultepec
Mexico, DF 11000
Mexico
JOURNALISTS: 001-888-779-5833
SUBSCRIBERS:52-55-1253-5700
Moody's confirms the assessment of Administradora de Activos Financieros S.A. (Acfin) as a Master Servicer of Residential Mortgage Loans in Mexico
