Fitch Ratings downgraded ratings on nine mortgage servicers because of tougher regulations and the lack of urgency these companies displayed in response to the foreclosure crisis. The credit rating agency took action on two Bank of America (BAC) servicing divisions of, two Wells Fargo (WFC) servicing divisions, JPMorgan Chase (JPM), Citigroup (C), MetLife Bank (MET), PNC Bank (PNC) and SunTrust Mortgage (STI). For a complete list of the updated ratings expand the chart below:
In late 2010, procedural defects surfaced across the servicing industry. Servicers halted the foreclosure process to fix affidavits required in judicial states. Federal regulators followed with investigations and consent orders, requiring new standards for servicing loans. Negotiations between the 50 state attorneys general remain ongoing. “The full extent of the concerns resulting from this and other related functions within servicer operations is far from resolved. Fitch expects that the additional scrutiny from a wide range of interested parties, as well as the potential new regulation and heightened risk from litigation, will result in continued reluctance to proceed with foreclosure,” Fitch said. In November, Fitch placed these ratings on watch and complete a full review of the rated sevicers later in 2011. Fitch already incorporated the heightened resolution times and loss severities into its analysis of outstanding residential mortgage-backed securities bonds. Therefore, it does not expect to change outstanding RMBS bond ratings. Write to Jon Prior. Follow him on Twitter @JonAPrior.