Popular’s Subprime Servicing Rating Drops

Ratings has downgraded Popular Mortgage Servicing Inc.'s (PMSI) U.S. residential primary servicer rating for subprime product to RPS3 from RPS2-. The rating is also placed on Rating Watch Negative. Fitch says the action is based on the changed financial condition of PMSI's ultimate parent, Popular Inc., whose long-term Issuer Default Rating was downgraded June 8, from BBB to B. The Rating Watch Negative for PMSI's servicer rating indicates that Fitch may either downgrade or affirm the servicer rating depending upon the stability of PMSI's servicing portfolio, operational capabilities and financial condition. Fitch recently completed its annual operational review of PMSI's servicing platform and determined that, operationally, the company is performing at a level near the prior year's assessment in most areas. Therefore, the servicer rating downgrade primarily reflects Fitch's concern regarding the potential impact on PMSI's servicing operations from continued pressure on Popular's financial flexibility in the residential mortgage market. A company's financial condition is an important component of Fitch's servicer rating analysis, the agency adds. PMSI is located in Cherry Hill, N.J. In November 2008, Popular sold mortgage servicing assets being serviced by PMSI to various Goldman Sachs affiliates. As of March 31, 2009, PMSI's servicing portfolio consisted of just over 10,500 loans totaling $915 million – a decrease from over 82,600 loans totaling $11.6 billion as of Jan. 31, 2008. As a result, the company has seen a significant reduction in staffing levels. Management stated that a potential sale of the PMSI servicing platform is currently in process. SOURCE: Fitch

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