Fitch Ratings takes the following rating actions on Selene
Finance LP's (Selene) U.S. residential mortgage servicer ratings:
--Initial U.S. residential primary servicer rating for Subprime product assigned at 'RPS3'; Outlook Positive;
--Initial U.S. residential special servicer rating assigned at 'RSS3'; Outlook Positive.
The rating actions are based on Selene's capable default performance; focused, 'high touch' servicing approach; and investment in servicing technology. However, the ratings also reflect Selene's limited operating history, specifically with respect to servicing loans in RMBS transactions, and its developing internal control environment. In addition, the ratings reflect the financial condition of Selene, a non-publicly rated entity, as financial condition is a component of Fitch's servicer ratings.
Fitch recently completed its operational review of Selene's servicing operations and believes the company has a capable servicing platform with the capacity and infrastructure to maintain and increase its residential servicing operations. Selene's first Regulation AB report was issued in September 2011 with no material exceptions noted. Based on the analysis and the company's profile, Fitch has assigned a Positive Outlook to Selene's servicer ratings. Fitch will continue to monitor the company's performance and operational capabilities, while pursuing its growth initiatives in a high delinquency environment. The ratings also reflect 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, which are likely to be mandated by regulators and other parties. The ratings were determined in accordance with Fitch's criteria 'Rating U.S. Residential and Small Balance Commercial Mortgage Servicer Rating Criteria' and 'Global Rating Criteria for Structured Finance Servicers' which are available on the Fitch Ratings web site at 'www.fitchratings.com'.
Selene is owned by Selene Ventures LLC (99% limited partner) and Selene Ventures GP LLC (1% general partner. Selene Holdings LLC is the parent company. The company acquired the special servicing subsidiary of Aegis Mortgage Corporation in September 2007. Selene's servicing operation is headquartered in Houston TX, with additional servicing sites in Horsham PA and Jacksonville FL. As of Dec. 31, 2011, Selene was servicing over 8,100 loans with a UPB of $1.9 billion. Subprime product made up 100% of the servicing portfolio by loan volume, and special servicing accounted for 95% of the servicing portfolio. In addition to servicing loans for the Selene residential Mortgage Opportunity Funds, Selene services loans for third-party clients.
Selene typically boards seriously delinquent portfolios. Prior to boarding, asset analysts working in small teams with a portfolio manager complete an in-depth review of due diligence data and recommend exit strategies on each loan. The asset analysts extensively review the loan origination and servicing files including collection notes and pay histories, and re-underwrite each loan to develop borrower-specific strategies based on investor requirements. Selene's loan resolution consultants (LRCs) contact the borrowers, identify the loss mitigation strategies associated with each borrower, and collect the necessary financial information to perform a thorough analysis of the projected loan resolution. The portfolio resolution consultants (PRCs) are the loss mitigators, responsible for negotiating the loan resolution strategy on each loan. Accounts per employee averaged 62 for this department at the time of Fitch's review.
In November 2010, Fitch assigned a Negative Outlook for the U.S. Residential Mortgage Servicer Ratings Sector on increased concerns surrounding procedural defects in the judicial foreclosure process. Fitch may place an individual servicer's ratings on Rating Watch Negative and/or downgrade the ratings if the servicer does not maintain processes to identify and take corrective action to remediate any foreclosure action or documentation failures. Fitch may take similar actions on a servicer's ratings if required technology or process changes and cost borne by the servicer due to regulatory or oversight requirements in the current environment materially impact the servicer's ability to maintain performance levels.
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 U.S. Residential and Small Balance Commercial Mortgage Servicer Rating Criteria.
SOURCE Reuters