Special Servicer Fay Servicing reached a milestone, achieving its first servicing ratings from Fitch and Standard & Poor’s — a development that gives the firm a leg up with investor clients that may be considering entrance into the private-label mortgage securitization space.
If Fay is the servicer of a loan moving into the private-label sector, all parties to the transaction will be interested in the company's servicer ratings, the company’s CEO Ed Fay told HousingWire.
From Fitch, the company obtained subprime and special servicer residential ratings of RPS3 and RSS3 – along with a stable outlook. S&P gave the firm an average rating for its residential mortgage subprime and special servicer rating with a stable outlook as well.
Fay noted that the firm "matched favorably or did better than some of its other competitors" in key areas related to loan servicing.
The special servicer’s effective use of its internal single-point-of-contact system, integrated technology and experienced staff helped it obtain solid ratings out of the gate. Fay says the only drawbacks were having its REO-outsourced and a short history with the firm being only several years old.
The company, however, is not focused on REO, but on handling its servicing clients and offering them a servicer that can easily compliment their potential move into private-label securities.
“It’s not our priority to attract additional clients," Fay said.
Instead, the focus is giving existing clients the option of a rated servicer as they take their books of business to the private-label securitization market. One of Fay Servicing’s clients has already put their first security out. Having Fay as a rated servicer allows these firms a certain amount of leverage that would not be available during the security rating process without this development.
"If the private-label securitization market wasn’t coming back, this would not have been a priority for us," Fay said.
But the emergence of the private-label market is not the only thing that makes a solid rating essential today, Fay says. As the qualified mortgage rule rolls out and other guidelines hit the market, servicers will be asked to know more about each loan and to have a plan throughout a mortgage's life cycle.
"We are going to change how we lend again – whether it be non-QM or simply non-agency lending – you can’t look at it as simply different underwriting guidelines," Fay noted. Instead, you have to have a long term plan for this customer and loan, extending throughout the next 30 years, he explained.
Heading into that era of lending, Fay is glad to have this milestone passed him.
"These results validate that we’ve built a strong foundation for future growth, including securitizations, and that we will continue to responsibly and effectively serve homeowners, lenders and investors for years to come," the CEO said.