March 30, 2012 / 9:41 PM / 8 years ago

TEXT-Fitch assigns Selene Finance residential mortgage servicer rating

March 30 - Fitch Ratings takes the following rating actions on Selene
Finance LP's (Selene) U.S. residential mortgage servicer ratings:	
	
--Initial U.S. residential primary servicer rating for Subprime product assigned	
at 'RPS3'; Outlook Positive; 	
	
--Initial U.S. residential special servicer rating assigned at 'RSS3'; Outlook 	
Positive. 	
	
The rating actions are based on Selene's capable default performance; focused, 	
'high touch' servicing approach; and investment in servicing technology. 	
However, the ratings also reflect Selene's limited operating history, 	
specifically with respect to servicing loans in RMBS transactions, and its 	
developing internal control environment. In addition, the ratings reflect the 	
financial condition of Selene, a non-publicly rated entity, as financial 	
condition is a component of Fitch's servicer ratings. 	
	
Fitch recently completed its operational review of Selene's servicing operations	
and believes the company has a capable servicing platform with the capacity and 	
infrastructure to maintain and increase its residential servicing operations. 	
Selene's first Regulation AB report was issued in September 2011 with no 	
material exceptions noted. Based on the analysis and the company's profile, 	
Fitch has assigned a Positive Outlook to Selene's servicer ratings. Fitch will 	
continue to monitor the company's performance and operational capabilities, 	
while pursuing its growth initiatives in a high delinquency environment. 	
	
The ratings also reflect Fitch's overall concerns for the U.S. residential 	
servicing industry which include the ability to maintain high performance 	
standards while addressing the rising cost of servicing and changes to industry 	
practices, which are likely to be mandated by regulators and other parties. The 	
ratings were determined in accordance with Fitch's criteria 'Rating U.S. 	
Residential and Small Balance Commercial Mortgage Servicer Rating Criteria' and 	
'Global Rating Criteria for Structured Finance Servicers' which are available on	
the Fitch Ratings web site at 'www.fitchratings.com'. 	
	
Selene is owned by Selene Ventures LLC (99% limited partner) and Selene Ventures	
GP LLC (1% general partner. Selene Holdings LLC is the parent company. The 	
company acquired the special servicing subsidiary of Aegis Mortgage Corporation 	
in September 2007. Selene's servicing operation is headquartered in Houston TX, 	
with additional servicing sites in Horsham PA and Jacksonville FL. As of Dec. 	
31, 2011, Selene was servicing over 8,100 loans with a UPB of $1.9 billion. 	
Subprime product made up 100% of the servicing portfolio by loan volume, and 	
special servicing accounted for 95% of the servicing portfolio. In addition to 	
servicing loans for the Selene Residential Mortgage Opportunity Funds, Selene 	
services loans for third-party clients. 	
	
Selene typically boards seriously delinquent portfolios. Prior to boarding, 	
asset analysts working in small teams with a portfolio manager complete an 	
in-depth review of due diligence data and recommend exit strategies on each 	
loan. The asset analysts extensively review the loan origination and servicing 	
files including collection notes and pay histories, and re-underwrite each loan 	
to develop borrower-specific strategies based on investor requirements. Selene's	
loan resolution consultants (LRCs) contact the borrowers, identify the loss 	
mitigation strategies associated with each borrower, and collect the necessary 	
financial information to perform a thorough analysis of the projected loan 	
resolution. The portfolio resolution consultants (PRCs) are the loss mitigators,	
responsible for negotiating the loan resolution strategy on each loan. Accounts 	
per employee averaged 62 for this department at the time of Fitch's review. 	
	
In November 2010, Fitch assigned a Negative Outlook for the U.S. Residential 	
Mortgage Servicer Ratings Sector on increased concerns surrounding procedural 	
defects in the judicial foreclosure process. Fitch may place an individual 	
servicer's ratings on Rating Watch Negative and/or downgrade the ratings if the 	
servicer does not maintain processes to identify and take corrective action to 	
remediate any foreclosure action or documentation failures. Fitch may take 	
similar actions on a servicer's ratings if required technology or process 	
changes and cost borne by the servicer due to regulatory or oversight 	
requirements in the current environment materially impact the servicer's ability	
to maintain performance levels. 	
	
Fitch rates residential mortgage primary, master, and special servicers on a 	
scale of 1 to 5, with 1 being the highest rating. Within some of these rating 	
levels, Fitch further differentiates ratings by plus (+) and minus (-) as well 	
as the flat rating.U.S. Residential and Small Balance Commercial Mortgage Servicer Rating Criteria
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