Deteriorating subprime loan performance and a downgrade at its parent were among the factors behind a reduction in Select Portfolio Servicing Inc.’s servicer rating.
The downgrade impacts the Salt Lake City-based firm’s rating as a primary servicer of subprime residential mortgages as well as its special servicer rating.
SPS was previously known as Fairbanks Capital Corp. until it was acquired by Credit Suisse First Boston from PMI Group Inc. in 2005.
Moody’s Investors Service, which announced the action on Friday, said that SPS’ servicer quality assessment as a primary servicer of subprime residential mortgages was lowered to SQ2 from SQ2+.
Ratings range from the highest possible rating of SQ1+ to the lowest rating of SQ5-.
The company’s rating as a special servicer was also downgraded to SQ2 from SQ2+.
The ratings agency noted that collection abilities, timeline management and servicing ability were all above average.
“SPS showed consistent and solid average speeds of answer and abandonment rates in their call center metrics even as the company grew its servicing portfolio, reflecting the company’s ability to accurately forecast call volumes and proactively staff its call center,” Moody’s said. “Collectors are trained to offer modifications, short sales, and deeds in lieu in addition to repayment plans to borrowers, prior to transitioning workouts onto the loan resolution team for underwriting and processing.”
SPS continues to bring its management and asset managers to major REO markets in order to increase local market knowledge and broker interactions.
Since Moody’s last review in November 2011, SPS has reportedly improved its short sale process by offering cash for keys to borrowers and tenants and by providing borrowers access to its own real estate broker network.
But Moody’s said that the loss mitigation assessment was downgraded to above average from strong primarily as a result of deterioration in its total cure and cash flowing metric ranking compared to peers because of improvement in peer performance.
In addition, subprime loan performance has been deteriorating compared to the servicer’s peers, according to Moody’s.
Another negative factor is the fundamental rating of SPS-parent Credit Suisse (USA), which has been reduced to A1 from Aa1.
Moody’s noted that SPS’ SQ2 rating as a primary servicer of residential second liens was affirmed.
SPS serviced 300,312 loans for $55.1 billion as of May 31.
The portfolio has grown since Sep. 30, 2011, when 197,631 loans were serviced for $31.1 billion.