Fitch: Large Banks Continue to Pull Away from U.S. RMBS Servicing Exposure

Basel III and ongoing regulatory scrutiny led big U.S. banks further away from servicing residential mortgage loans as non-banks swooped in and beefed up their portfolios, said Fitch Ratings, New York, in its latest U.S. residential mortgage-backed securities servicer handbook.

Fitch said portfolios for the largest bank servicers, including Wells Fargo, JPMorgan Chase Bank, Bank of America. and CitiMortgage, dropped by 1.6% in the third quarter from the previous quarter, although Fitch noted Wells Fargo’s $51billion acquisition of mortgage servicing rights from Seneca Mortgage Servicing last quarter could ultimately lift the portfolio size of the bank.

Meanwhile, Fitch reported a number of regional bank servicers demonstrated solid growth during the quarter, including Flagstar, FSB (+4.7%); HomeStreet Bank (+4.4%); First Republic Bank (+3.6%); and PNC Mortgage Services (+2.2%). Fourteen of 17 Fitch rated non-bank servicers increased in size through the third quarter by an aggregate of 6.3%. The largest non-bank servicer, Nationstar Mortgage LLC (Mr. Cooper) continued its acquisitive activity and grew by 7.6% to $494 billion.

Fitch noted Ocwen Loan Servicing LLC, meanwhile, continues to work through regulatory matters while its portfolio fell by 3.9% to $181.6 billion. The two remaining non-bank servicers also saw their portfolios decline marginally. BSI Financial Services Inc.’s portfolio declined by $1.2 billion to $7.1 billion while Statebridge Company LLC’s exposure fell by $70 million to $1.9 million.