Aurora’s Proposed Sale Triggers Fitch Action On Servicer Rating

Fitch Ratings has placed on ‘rating watch evolving’ several mortgage servicer ratings belonging to Aurora Loan Services LLC. The actions are partly based on the proposed sale of Aurora's parent company, Aurora Bank FSB, which Fitch expects to be completed by May 2012.

Fitch uses the ‘rating watch evolving’ classification to warn of the heightened probability of a rating change, be it an upgrade, a downgrade or an affirmation. The rating actions affect Aurora's residential master servicer rating (updated at RMS2-), primary servicer rating for Alt-A and subprime products (RPS2- and RPS3+, respectively) and special servicer rating (RSS3+).

According to Fitch, Aurora Bank's proposed buyer is unknown at this time. Also unclear at the present moment is the potential buyer's ultimate intention for the servicing platform.

"However, Fitch believes that either an orderly change in ownership and/or management will occur with the platform remaining in place, or the servicing rights will be transferred to another acceptable, capable platform," the agency says, adding that Aurora's staff would likely remain in place during the transition.

Fitch's rating actions are also based on its annual review of Aurora's servicing operations, which confirmed that the company has "maintained or improved its operating standards while addressing uncertainties regarding the ongoing negotiations surrounding the sale of Aurora."

As of the end of the third quarter, Aurora, which has servicing offices in Colorado, Nebraska, Indiana and Missouri, maintained a servicing portfolio of 294,482 loans with an unpaid principal balance of $68.7 billion.

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