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Related Issuers
Rating Action - Servicer:

Moody's downgrades SunTrust's SQ rating and maintains rating on review for possible downgrade

Global Credit Research - 06 Mar 2012

U.S. Residential Mortgage Servicer Rating Action

New York, March 06, 2012 -- Moody's has downgraded the servicer quality ("SQ") rating of SunTrust Mortgage Inc ("SunTrust") to SQ2 from SQ2+ as primary servicer of prime residential mortgage loans. The downgrade was mainly due to the deterioration of the company's collections and timeline performance metrics. The rating remains on review for possible downgrade.

Moody's review for downgrade was initiated in October 2010 due to irregularities in SunTrust's foreclosure processes. Although SunTrust has re-verified and resubmitted pending affidavits and improved their document execution process, Moody's believes that the attorneys general settlement will likely be expanded to include SunTrust and the full financial and operational impact of the settlement is still unknown.

We lowered SunTrust's collection assessment to above average from strong. The loan performance metrics for collections deteriorated during the review period as compared to peers. The company continues to implement innovative collection calling campaign contact strategies to increase contact rates with borrowers.

Moody's assessment of SunTrust's loss mitigation abilities is above average. The company increased its call center hours in the loss mitigation department to increase capacity. SunTrust also has a dedicated team of loss mitigation representatives attending outreach events across the U.S.

We maintained SunTrust's foreclosure and REO timeline management at average. The company added significant staffing volume during the review period to address the increased volume of loans in foreclosure and REO.

Moody's views the company's servicing stability as above average. SunTrust Mortgage, Inc. is a wholly-owned subsidiary of SunTrust Bank, which is rated A3 for long term debt. SunTrust Bank is a wholly-owned subsidiary of SunTrust Banks, Inc., a bank holding company rated Baa1 for senior unsecured debt, and the rating outlook is stable. SunTrust's primary servicing portfolio totaled approximately 904,609 thousand loans for an unpaid principal balance of approximately $158 billion as of December 2011.

The previous rating action for SunTrust occurred on October 21, 2010. At that time, Moody's placed SunTrust's primary servicer rating on review for possible downgrade due to irregularities in the company's foreclosure process.

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 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.

Francis Wissman
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 SunTrust's SQ rating and maintains rating on review for possible downgrade
No Related Data.

 

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