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50 | Th e M Rep o RT O r i g i nat i O n S e r v i c i n g a na ly t i c S S e c O n da r y m a r k e t SERVICING The laTesT Fitch downgrades green tree rating The servicer's fast-paced portfolio growth is one major reason for the rating downgrade. F itch Ratings Inc., down- graded Green Tree Servic- ing, LLC's, U.S. RMBS Servicer Rating, assign- ing the company the "Negative Outlook" label. The downgrade comes after Ocwen Financial an- nounced it would sell $9.6 billion worth of servicing rights to Green Tree. Fitch said in a press release the downgrade is tied to Green Tree's aggressive portfolio growth in the past two years. "The company's servicing portfolio increased to 2,132,201 loans totaling $229.2 billion as of Dec. 31, 2014 from 926,182 loans totaling $73.1 billion as of Dec. 31, 2012," Fitch said. "Green Tree became subject to oversight by OMSO and compliance with the NMS in connection with its MSR acquisition in 2013 of 380,000 Fannie Mae loans from ResCap. While Green Tree's management had indicated to Fitch earlier that the 300 NMS standards had been implemented, Fitch believes that the aggressive timing of the integration of the NMS testing requirements for the ResCap portfolio may have contributed to their resultant failures." Fitch rates servicers on a scale from 1 to 5, with one being the highest possible rating. Green Tree's rating was downgraded from 2+ to 2-. Ocwen, which has been trying to sell off all of its Fannie Mae and Freddie Mac servicing portfolio, is currently rated at level 4. Fitch said the downgrade is based on several areas of weakness in Green Tree's corporate gover- nance and operational controls. "Fitch found that the issues iden- tified by external parties were not identified and corrected through the company's own internal processes. The ratings reflect the company's aggressive portfolio growth, and also take into consideration the financial condition of Green Tree's parent, Walter Investment Management Corp (Walter), a non- publicly rated entity by Fitch, as financial condition is a component of Fitch's servicer ratings." According to Fitch, Green Tree failed eight of the 29 National Mortgage Settlement (NMS) metrics at the end of the fourth quarter of 2013. While Green Tree was quick to address those issues and managed to meet satisfactory ratings for all eight metrics, Fitch cited these previ- ous issues had a negative impact on Green Tree's rating. report Says loan modification Programs trigger Strategic default Economists say programs targEtEd to hElp homEownErs may do morE harm than good in thE long run. r emember those loan modification programs the federal government introduced as a way to prevent further ruin for stressed homeowners after the bottom dropped out the housing market? It turns out they may be doing more harm than good in the long run, according to an April report from economists at York and Kent State universities. The report, by Xianghong Li of the York University Department of Economics and Xinlei Shelly Zhao, a risk analyst at Kent State who also works for the federal Office of the Currency Comptroller, finds that popular loan modification programs such as the Home Affordable Mortgage Program (HAMP) significantly increase default rates among borrowers who are current in their payments and decrease the cure rate of borrowers who were delinquent before entering a modification program. A major problem, according to the authors, is that the reduced rates offered through programs like HAMP encourage many current borrowers to simply skip payments so that they then will have stressed mortgages that allow

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