RoundPoint’s Rating Outlooks Revised from ‘Stable’ to ‘Negative’

Fitch Ratings confirmed that borrower-focused company, RoundPoint Mortgage Servicing Corporation's (RPMS's) residential mortgage servicer ratings have been adjusted. Fitch determined that RoundPoint's U.S. residential primary servicer rating for subprime product is 'RPS3+' and the U.S. residential special servicer rating is 'RSS3+'. In addition, the rating outlooks have been revised to 'negative' from 'stable.'

"Fitch has placed the servicer ratings on Outlook Negative based on the corporate restructuring," Fitch noted. "Additionally, given elevated earnings pressure associated with corporate changes, Fitch believes the servicer's dependency upon parent company support is now heightened in order to maintain expected balance sheet growth and meet earnings targets."

The rating affirmations are based on RPMS's continued investment in its compliance management system, experienced management team and staff, increased automation, and enhanced servicing system and processes, Fitch says. The servicer's effective staffing, recruiting and retention program, and its 'White Glove' customer service that focuses on improving customer service disciplines throughout the organization is also taken into consideration.

RPMS was servicing 249,162 loans totaling $46.9 billion as of March 31, 2015, Fitch reports. This consisted of 226,618 agency loans totaling $44 billion and 3,400 non-agency RMBS loans for $610 Million and 19,144 loans serviced for others totaling $2.1 billion.

RPMS has operated as a stand-alone business entity since October 2014, according to Fitch. Shared corporate functionalities and expenses between the parent company, RoundPoint Financial Group (RPFG) and RPMS, were terminated. In addition, two of RPFG's executive officers transitioned to the servicing operations.

In October 2014, RPMS's sister company, RoundPoint Mortgage Company (RPMC), terminated its operation as an originator of residential mortgage loans. RPMC previously provided refinancing programs and acted as a conduit for flow servicing for RPMS. Fitch does not believe that RPMC's exit will have a material impact on RPMS's servicing operation.

"The ratings also take into consideration RPMS's enterprise risk management practices," Fitch said. "The servicer was fully compliant with its 2014 Regulation AB reporting and stated that it has no outstanding regulatory issues concerning its servicing platform. In addition, the ratings reflect RPMS's enhanced default management capabilities, effective staff performance incentive and management oversight programs. The ratings also reflect the financial condition of RPMS, a non-publicly rated entity, as financial condition is a component of Fitch's servicer ratings."