Popular Mortgage Servicing Ratings Affirmed; Delinquencies Nearing 30 Percent

New Jersey-based Popular Mortgage Servicing Inc., a large subprime servicer, saw its U.S. primary residential servicer rating for subprime product affirmed by Fitch Ratings Friday at ‘RPS2-.’ Fitch rates servicers on a 1 through 5 scale, with 1 representing the best possible rating.

As of Jan. 31, PMSI serviced over 82,600 loans totaling over $11.6 billion. Fitch’s affirmation comes on the heels of an announcement by corporate parent Popular, Inc. (BPOP: 2.45 +0.41%) last week that said the company would sell its U.S. mortgage business to Goldman Sachs (GS: 170.01 -1.63%) in a deal worth approximately $1.17 billion; the deal includes the sale of the company’s servicing platform.

As with other subprime servicers, Fitch noted that PMSI is experiencing a substantial increase in delinquencies — and warned that continuing increases in delinquencies will “stress on the servicing operation.”

The agency noted that the amount of delinquent loans, foreclosures and REO properties in PMSI’s servicing portfolio increased to 29.5 percent of the portfolio, up dramatically from 13.8 percent one year earlier.

The surge in troubled borrowers has put the company’s loss mitigation platform under considerable stress: Fitch cited a high average call hold time of 61.6 seconds, and an average abandonment rate of 6.04 percent in its collections department. Not surprisingly, PMSI has loaded up on temps in its collections department via a “temp to hire” program, and has reassigned underwriting staff from its retention department to assist in underwriting loan modifications.

The story at PMSI is likely far from unique, especially for servicers managing a large portfolio of subprime — and now, Alt-A and neg-am loans.

For more information, visit http://www.fitchratings.com.

Disclosure: The author held no positions in BPOP or GS when this story was published; indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.