Fitch Ratings on Thursday downgraded Popular Mortgage Servicing Inc.'s (PMSI) US residential primary servicer rating to 'RPS3' from 'RPS2-' and stuck the rating on negative watch. Fitch rates servicers from one to five, with one ranking the highest. The rating agency's decision on Popular reflects potential impact on PMSI's servicing operations from financial pressure and continuing challenges among the residential mortgage market. Fitch said it will continue to monitor PMSI's ability to manage its servicing performance in "a high delinquency environment" going forward. In September, Fitch noted Popular's rising delinquency rate -- nearly 30% at the time -- and affirmed it's 'RPS2-' rating. Since then, however, PMSI sold off much of its servicing business to Goldman Sachs (GS) affiliates. PMSI's servicing portfolio now consists of 10,500 loans worth $915m, down from more than 82,600 loans worth $11.6bn, Fitch said. As the company's servicing business contracts, forcing staff cuts in the process, talk is developing among management around the potential sale of PMSI's servicing platform, according to the rating agency. Write to Diana Golobay. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.