Fitch: U.S. RMBS Servicers ‘Scrubbing’ Portfolios of Problem Loans

Fitch Ratings, New York, said U.S. residential mortgage-backed securities servicers are continuing to grow their portfolios with much cleaner products, while the volume of problematic loans continues to decline.

The agency’s latest U.S. RMBS Servicer Handbook noted its rated U.S. RMBS servicers’ portfolios have grown by more than 6% over the past year, with much of it coming from newly originated and clean performing loans. Aggregate delinquency rates for these servicers have also dropped to 2.13% from 2.82% during this same period.

Fitch said over the past year, the top three growth firms by unpaid principal balance serviced are Flagstar Bank, Shellpoint Servicing, and Select Portfolio Servicing. Flagstar and Shellpoint have grown largely through their own quality new loan origination/aggregation activities. However, SPS has continued with a focus on underperforming and challenging-to-service loans acquired from multiple sources including bank clients.

“Improved portfolio attributes and better loan performance are enabling many mortgage servicers to grow their loan portfolios, with some companies doing so despite reduced staff,” said Fitch Managing Director Roelof Slump. “Overall servicing portfolio growth has been trending at around 5%-7% while servicing full-time employee staff has declined 11% in aggregate year-over-year.”

By contrast, Fitch said servicing portfolios for the largest U.S. bank servicers—Wells Fargo, JP Morgan Chase, and Bank of America–continue to fall, this time by an average of 4.97% over the past year despite continuing to originate new quality loans. “Banks have actively sought to reduce their investments in this asset in recent years due to changes in accounting rules and less interest in handling delinquent loans,” Slump said.