Fitch Upgrades Residential Credit Solutions' Servicer Ratings

Mortgage servicer Residential Credit Solutions (RCS) stands out from the crowd in today’s world of almost commonplace ratings downgrades and default servicing challenges. RCS was awarded two upgrades from Fitch Ratings Friday. The company’s residential primary servicer rating for subprime products was upgraded from ‘RPS3+’ to ‘RPS2-’ and its residential special servicing rating was bumped up from ‘RSS3+’ to ‘RSS2-’. Fitch said the rating actions reflect RCS’s “effective default capabilities and competitive performance metrics; focused, ‘high touch’ servicing approach; [and] effective foreclosure practices,” as well as the company’s strengthening financial condition. RCS operates its servicing platform from Fort Worth, Texas, with a servicing staff of 178 full-time employees. RCS also maintains a facility in Los Angeles for future growth. The company’s strategy remains focused on credit-sensitive and servicing-intensive residential mortgage assets. “Recent industry events and regulatory actions have brought attention to the need for more effective servicing of distressed portfolios,” said Dennis Stowe, RCS president and CEO. “RCS was purpose-built to focus on effective borrower outreach and communication,” Stowe added, “making significant investments in technology to ensure timely and consistent response to borrowers requesting assistance.” As of June 30, 2011, RCS’s servicing portfolio consisted of more than 29,200 loans totaling $4.8 billion. The company has doubled its portfolio over the last year. As recently as February 28, 2010, RCS serviced approximately 13,500 loans totaling $2.8 billion. “Everybody is worried about capacity in the industry,” Stowe commented, “and we’ve proven our ability to maintain our competitive performance even while growing our portfolio of distressed assets, both for our own investment and in servicing for others.” The current portfolio includes more than 17,100 subprime first and second lien mortgage loans. Approximately 70 percent of RCS’s portfolio is under special servicing arrangements. RCS’s loss mitigation department is staffed at approximately 150 loans per full-time employee. Once loans are referred to loss mitigation, they are assigned to individual agents for the life of the default. As Fitch explained, this approach helps to maximize loan-level knowledge, create accountability, and build rapport with the borrower in an effort to reach a resolution that avoids foreclosure. RCS utilizes a loss mitigation application it developed with a financial analytics technology firm. The application incorporates automated underwriting technology, investor-specific rules, and real-time credit bureau updates. Borrower financial data is automatically underwritten and processed against system rules for real-time workout recommendations and net present value (NPV) analysis for multiple loss mitigation programs simultaneously. “Fitch believes that RCS continues to maintain a capable servicing operation with the staff, procedures, controls, default management processes, and technology” to manage its portfolio in today’s high delinquency environment, the ratings agency said.