Nationstar Mortgage LLC saw its primary servicer rating for subprime mortgages downgraded one notch on Thursday, with Fitch Ratings moving the Lewisville, Tex.-based servicer from 'RPS2' to 'RPS2-.' The rating agency's servicer rating scale runs from one to five, with one representing the best rating. Citing "reduced financial flexibility resulting from overall market illiquidity," Fitch analysts Stephanie Whited, Shashi Srikantan and Mary Kelsch said that they believed the company's finances remain strained so long as difficult market conditions persist. Nationstar is owned by private equity investor Fortress Investment Group, which bought Nationstar in 2006 from Centex Corporation. As of Aug. 31, 2008, the company's mortgage portfolio included 89,263 units, totaling a UPB of just under $12 billion, Fitch said. Nationstar's portfolio is predominantly subprime (93.3 percent); however, they do service 6,297 units for Fannie Mae (FNM) and Freddie Mac (FRE), as well. In August, HousingWire broke the story that the former subprime lending giant was planning a comeback as a conforming and FHA led-lender; while Fitch didn't note as such in its analysts' report, much of the new FNM/FRE servicing volume reflects an effort by the company to resurrect its lending efforts on a servicing-retained basis, sources told HW. It's unclear at what rate Nationstar plans to grow its conforming servicing portfolio going forward. Servicer ratings are critical for investors, including Fannie and Freddie; a low enough rating can give investors the right to transfer servicing, for one thing. During the boom, a servicer's rating often also affected overcollateralization required by rating agencies for the issuance of most private-market RMBS deals. Nationstar's new rating level from Fitch is extremely unlikely to trigger any such investor movement, however; usually, a rating would need to fall below an 'RPS3-' level for such a risk to become a material risk. Write to Paul Jackson at paul.jackson@housingwire.com. Disclosure: The author held no relevant investment positions 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.