Other B&C Firms Also Under Review
In March, Fitch Ratings warned that the effect of the liquidity crisis in the subprime mortgage space could lead to ratings downgrades for B&C mortgage servicers. The rating agency quickly illustrated the point by downgrading two subprime servicers.
Fitch placed NovaStar Mortgage's "RPS2-" servicer rating for subprime home loans on Rating Watch Negative status, noting that the challenging conditions in the subprime marketplace have created uncertainties about NovaStar Financial's prospects.
Fitch also downgraded AMC Mortgage Services' primary servicer rating for subprime product to "RPS3+" from "RPS2+." The company's special servicer rating was lowered in a similar fashion. Fitch also placed the servicer ratings on Rating Watch Negative status.
AMC is a subsidiary of ACC Capital Holdings. Fitch said the rating change reflects the challenges in the market as well as the evolving relationship between ACC and Citigroup.
ACC has been stung by legal costs, asset quality challenges and early payment defaults and repurchases, all of which have led to higher servicing costs.
In late February, the company entered into an agreement with Citi to secure additional working capital. Citi also agreed to become ACC's primary warehouse lender in that deal.
The deal also gives Citi an option to acquire ACC's subprime wholesale mortgage originator, Argent Mortgage, and its mortgage-servicing platform.
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