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Related Issuers
Rating Action - Servicer:

Moody's upgrades Central Mortgage Company's servicer quality rating to SQ2 as Primary Servicer of prime loans

Global Credit Research - 04 May 2012

U.S. Residential Mortgage Servicer Rating Action

New York, May 04, 2012 -- Moody's has upgraded the servicer quality ("SQ") rating of Central Mortgage Company ("CMC") to SQ2 from SQ2- as a Primary Servicer of prime residential mortgage loans. Moody's rating is based on the company's above average collection abilities, above average loss mitigation results, above average foreclosure and REO timeline management, and average servicing stability.

RATINGS RATIONALE

The upgrade is primarily due to CMC's ability to maintain solid performance metrics while moderately growing its servicing portfolio.

We view CMC's collection abilities as above average. The company improved its collection roll rates from the prior review. CMC also maintained solid call center metrics, experiencing only minor spikes in its customer service average call abandonment rates. Call monitoring for call center agents is performed by the group's team leads. We believe that a separate, independent call monitoring group provides servicers with the ability to more objectively assess their customer service performance.

We view the company's loss mitigation results as above average. CMC maintained solid overall loss mitigation results during the review, demonstrating strong performance for its modified loans. The level of modifications performed by the company declined since the prior review as a result of a decreasing population of loans eligible for workout alternatives.

We view CMC's foreclosure and REO timeline management as above average. The company maintained solid foreclosure and REO timelines during the review. CMC outsources the marketing of its REO to two third-party vendors. The company manages contact with its network of foreclosure attorneys through email and by phone, but plans to implemented an automated communications tool in July.

Moody's views the company's servicing stability as average. The rating is based on CMC's history of consistent profitability, solid staffing ratios and judicious growth of its servicing portfolio. The assessment is balanced with the company's private ownership structure, third-party servicing acquisition model and continued volatility in the U.S. mortgage market.

CMC's servicing portfolio totaled 172,052 loans for an unpaid principal balance of approximately $33 billion as of March 31, 2012, reflecting moderate growth in the servicing portfolio.

CMC is an indirect wholly-owned subsidiary of Arvest Bank Group, Inc., a privately-owned bank holding company. The company is active in the acquisition of mortgage servicing rights in the secondary market, primarily focusing on Fannie Mae and Freddie Mac loans. CMC acquires the mortgage servicing rights through various daily and monthly flow and co-issue alliances with multiple lenders.

The previous rating action for CMC's SQ rating occurred on September 10, 2010. At that time, Moody's affirmed CMC's rating of SQ2- as a Primary Servicer of prime loans.

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 upgrades Central Mortgage Company's servicer quality rating to SQ2 as Primary Servicer of prime loans
No Related Data.

 

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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