TheMReport — News and strategies for the evolving mortgage marketplace.
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44 | 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 rmBS investors request 5 Servicer improvements enhanced incentive alignment and better reporting are among the proposed changes. y ears of hardships and constant changes in the mortgage service industry have encouraged RMBS 3.0 investors to voice their requests for servicer improvements, according to Fitch Ratings. "Most mortgage servicers have undergone significant transition since the mortgage crisis, includ- ing reductions in bank servicing portfolios and growth of non- bank servicing portfolios," the report states. "Investors in RMBS 3.0 are seeking further structural improvements in new transac- tions, including those directed at improving their ability to impact servicer performance." Fitch reports that these inves- tors are looking to change the following: 1. Improved incentive alignment 2. Better and more consistent reporting across servicers 3. Improved access to servicers 4. Effective arrangements for the reassignment of servic- ing responsibilities in cases of servicer underperformance or disruption 5. A high degree of servicing focus will be placed on any loans in new transactions that become delinquent or under- perform Many of these changes can be done by the servicers themselves or in some cases may require the use of a transaction manager (TM) or similar entity for over- sight purposes, Fitch says. The TM would take on a supervisory role of directing the actions of the servicers for the benefit of inves- tors. The manager would then ensure that servicers are comply- ing with the terms and condi- tions specified in detail in new transaction Pooling and Servicing Agreements. The punishment could mean early termination. "Fitch believes that such oversight can add particular value with weaker credit mort- gage pools with higher rates of delinquency," the report states. "Additionally, a TM working in tandem with a master servicer could add value to transactions which have unrated servicers or multiple primary servicers." Fitch intends to continue mon- itoring these new developments and their impact on RMBS transactions and believes that they will have a positive effect on the servicing industry. "While many servicers remain focused on their legacy servicing portfolios and regulatory matters, Fitch believes that opportunities currently exist for improvements in servicer effectiveness," the re- port concludes. "Those servicers that are able to evidence an abil- ity to respond to the heightened investor expectations while fulfilling all of their servicing responsibilities and requirements will have greater success over the longer run." $45B deal Finalized Between chase and Ocwen More than two months in the making, the mega transaction encompassed over a quarter-million Fannie Mae loans. a n agency mortgage servicing rights deal worth approximately $45 billion between Chase and Ocwen Financial Corp. has been finalized after two and a half months, according to a mid-May announcement from Chase. Ocwen first announced on March 2 it had signed a letter of intent to sell the $45 billion portfolio, which included about 266,000 high-quality Fannie Mae loans, to an anonymous buyer. Media reports that surfaced later that week indicated that the buyer was Chase, which was confirmed in May by both par- ties in the transaction. "Ocwen previously announced that the company signed a letter of intent with a buyer on the sale of mortgage servicing rights on a portfolio of performing agency loans owned by Fannie Mae with a total unpaid princi- pal balance of approximately $45 billion," an Ocwen spokesman said. "The letter of intent was subject to a definitive agreement and Fannie Mae and FHFA ap- provals." For Chase, purchasing the high-quality agency loans is con- sistent with the New York-based bank's strategy of enhancing the quality of its mortgage business. "Buying this prime servicing book will improve the quality of our servicing portfolio and will help drive a stronger and less volatile mortgage business," Chase Mortgage Banking CEO Kevin Watters said. "We expect the portfolio, in addition to lower delinquency rates overall, will help improve the value of our business." Chase began welcoming new customers in late May and began onboarding the loan portfolio on June 1. Chase said that about half of the new customers already have another product with the bank. "We are pleased to wel- come new customers to Chase Mortgage Banking and look forward to showing them why Chase is the No. 1 large bank in customer satisfaction," said Mike Weinbach, Chase Mortgage Banking head of servicing. "Delivering a great customer ex- perience will be our top priority as we begin transitioning new customers in June." The Chase deal is the latest in a series of multibillion-dollar agency MSR portfolio sales Ocwen has conducted this year. The Atlanta-based non-bank mortgage servicer has sold two agency MSR portfolios to Nationstar this year (one in February worth $9.8 billion and one in March worth $25 billion) and one to Green Tree Loan Servicing in March (worth $9.6 billion). "The agreement is now signed and the necessary approvals have been obtained," Ocwen said. "This sale to Chase furthers Ocwen's corporate strategy of