U.S. Residential Mortgage Servicer Rating Actions
New York, May 17, 2012 -- Moody's has downgraded and maintained on review for possible downgrade
the following servicer quality ("SQ") ratings of GMAC Mortgage,
LLC ("GMAC Mortgage"):
To SQ4+ from SQ3+ as a Primary Servicer of prime residential
mortgage
To SQ4 from SQ3 as a Primary Servicer of subprime residential mortgage
loans
To SQ4 from SQ3 as a Primary Servicer of second lien loans
To SQ4 from SQ3 as a Primary Servicer of HLTV residential mortgage loans
To SQ4 from SQ3 as a Special Servicer
RATINGS RATIONALE
The downgrade is due to a decline in GMAC Mortgage's servicing stability
resulting from its corporate parent's (Residential Capital Funding,
LLC) May 14 filing for Ch.11 bankruptcy protection. The
servicing stability assessment was reduced to weak from below average.
Residential Capital Funding is pursuing a Section 363 Sale to Fortress
Investment Group LLC. The proposed transaction with Fortress would
include the sale of substantially all of Residential Capital Funding's
assets, including its primary mortgage servicing and master servicing
businesses. We believe there is potential for servicing disruptions
through the closing of the transaction, as well as challenges during
the eventual integration of GMAC Mortgage and Nationstar, Fortress's
other servicing platform.
During the review period, Moody's will focus on GMAC Mortgage's
servicing performance and staff turnover, as well as the bankruptcy
court proceedings.
The previous rating action for GMAC Mortgage's SQ ratings occurred
on May 2, 2012. At that time, Moody's placed
all of the company's SQ ratings on review for possible downgrade
due to a decline in GMAC Mortgage's servicing stability.
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 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 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 downgrades GMAC's servicer quality ratings, maintains review for possible downgrade