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Fitch: No Rating Change for EMC

Fitch Ratings said the opening of an FTC investigation into EMC Mortgage Corp., the loan servicing unit of Bear Stearns, is not sufficient cause to initiate a rating action at this time.

Earlier, Standard & Poor's put its "above average" ratings for EMC on "ratings watch with negative implications" because of the FTC action.

EMC received a civil investigative demand from the FTC seeking documents and data relating to the servicer's business and servicing practices. This has led to numerous investor inquiries regarding Fitch's ratings for EMC, which are the highest assigned in these categories and are as follows: alt-A and subprime servicer "RPS1" and special servicer "RSS1."

The FTC issued the CID pursuant to a Dec. 8, 2005 resolution of the FTC authorizing nonpublic investigations of various unnamed subprime lenders, loan servicers and loan brokers to determine whether there have been violations of certain consumer protections laws.

The FTC investigation is in a very early stage, as EMC is still in the process of gathering the extensive documentation requested by the regulator. Fitch intends to monitor the progress of the investigation and will initiate a rating watch or downgrade if conditions warrant, though the agency feels that it is currently not appropriate to do so.

Fitch's "RPS1" and "RSS1" servicer ratings are based on both the analysis of EMC's operational and financial strengths, taking into consideration the fact that servicing operations can be subject to regulatory scrutiny from time-to-time.

Therefore, servicers who achieve top ratings from Fitch are expected to have the operational, legal and financial resources to respond effectively to such scrutiny, and to potentially effectuate any remedies required by regulators, without undue impact on servicing quality. EMC and Bear Stearns' long-term commitment and proven operations in the mortgage market, coupled with Bear Stearns' strong financial position, support these expectations.

Fitch said it will continue to monitor the progress of the FTC investigation of EMC, and will communicate any findings or concerns to the market as they arise.

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