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Strengthening RMBS Servicing

Fitch Rating added more than 80 new performance metrics across a wide variety of servicing functions including delinquent account collections, loss mitigation metrics, loan accounting, customer relationship management, and default administration to better assess servicer performance now and identify trends in real time.

“RMBS servicers are more sophisticated technologically today then they were pre-crisis and more adept at offering workout options to promote homeownership retention,” said Richard Koch, Director, US RMBS, Fitch Ratings.

According to Fitch, new rules and best industry practices have positioned U.S. Residential Mortgage Backed Security (RMBS) servicers to maintain consistent performance come the next housing market downturn, though new servicer metrics introduced by Fitch Ratings are showing some disparity in loan workout application completion rates among some servicers. The new metrics are detailed in a new report published today by Fitch.

Earlier this year, Fitch found that RMBS servicers are better equipped and better prepared for another financial crisis, according to Fitch Ratings. Fitch’s latest U.S. RMBS Servicer Handbook indicates that servicers are now better positioned than they were before the financial crisis, due to new technology and improved regulatory compliance over the past 10 years.

“Improved systems allow servicers to respond more quickly to unexpected events, as evident by strong delinquency recoveries after recent natural disasters,” said Roelof Slump, Managing Director at Fitch Ratings.

Fitch's newest analysis shows that loan workout application processing has on the whole improved post-crisis, while closed loan modifications performed consistently well among Fitch's servicer group at 6-, 12- and 18-month intervals post-closing. With respect to delinquent account collections, one of Fitch's new metrics, servicer performance was largely consistent among our servicer group when measuring successful promises-to-pay ratios in the 30-59 day, 60-89 day and 90+ day delinquency buckets. However, another new Fitch metric, loss mitigation metrics, reports that the disparity in reported loan workout application completion ranged from the low teens to 70%.

“Key RMBS Servicer Metrics Capture Performance” is available at www.fitchratings.com.

About Author: Seth Welborn

Seth Welborn is a Reporter for DS News and MReport. A graduate of Harding University, he has covered numerous topics across the real estate and default servicing industries. Additionally, he has written B2B marketing copy for Dallas-based companies such as AT&T. An East Texas Native, he also works part-time as a photographer.

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