--Initial U.S. residential primary servicer rating for Prime product assigned 'RPS2-'; Outlook Stable.
A level two rated servicer demonstrates high performance in overall servicing ability. Characteristics of a level two rated servicer include a stable servicing operating history, strong financial resources, strong procedures, controls and risk management framework, and experienced leadership.
The rating action is based on FRB's effective high touch servicing model and established internal control environment. Due to this personal service approach and the low level of delinquencies, the rating also reflects FRB's moderate use of servicing technology and the relatively low volume of REO assets that the company historically has handled. In addition, the rating incorporates the company's financial condition. FRB is rated 'A-'; Outlook Stable by Fitch.
Finally, the rating also incorporates Fitch's overall concerns for the U.S. residential servicing industry which include the ability to maintain high performance standards while addressing the rising cost of servicing and changes to industry practices, mandated by regulators and other parties.
FRB is a
FRB's high touch servicing model is well integrated into the bank's overall residential lending strategy. Relationship managers (RMs) are involved in all aspects of residential mortgage origination and servicing.
The incentive structure for RMs ensures strong knowledge of the borrowers and mortgaged properties that helps to address performance concerns. This servicing model is extremely effective for the high quality loans and high net worth borrowers that comprise most of FRB's residential mortgage portfolio. As of
FRB's internal audit department performs risk-based audits across the organization. The chief auditor reports to the audit committee of the board of directors; the audit committee is comprised of outside directors. FRB's lending services internal control department works closely with the company's internal audit, compliance, enterprise risk management, and lending services to ensure all processes and procedures in the residential mortgage lending operations are in compliance with regulatory guidelines and are minimizing risk exposure to the company.
FRB relies on its experienced servicing management and staff that operate without a significant emphasis on technology. FRB has not invested in extensive collections or default management systems due to its historically very low volume of delinquencies and defaults. In addition, most defaulted loans are resolved prior to completing a foreclosure sale, limiting the volume of REO properties that FRB has historically handled. As of
Fitch rates residential mortgage primary, master, and special servicers on a scale of 1 to 5, with 1 being the highest rating. Within some of these rating levels, Fitch further differentiates ratings by plus (+) and minus (-) as well as the flat rating. For more information on Fitch's residential servicer rating program, please see Fitch's report 'Rating U.S. Residential and Small Balance Commercial Mortgage Servicer Rating Criteria', dated
Additional information is available at 'www.fitchratings.com'.
--'Global Rating Criteria for Structured Finance Servicers' (
--'U.S. Residential and Small Balance Commercial Mortgage Servicer Rating' (
Global Rating Criteria for Structured Finance CDOs
U.S. Residential and Small Balance Commercial Mortgage Servicer Rating Criteria -- Effective
Source: Fitch Ratings
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