Subprime Woes May Challenge Servicers

Fitch Ratings says that the liquidity pressure currently squeezing the subprime residential mortgage sector may affect their loan servicing operations.Fitch has already lowered the servicer rating on several nonprime lenders, among them AMC Mortgage Services and NovaStar Mortgage, and the rating agency advised in a recent report that the financial condition of a servicer's parent is an important component in rating a servicing operation. Senior director Mary Kelsch said the financial strength of a company is important because it affects the servicer's ability to remain in business and continue making investments in infrastructure, systems and staffing to meet current and future servicing needs in the troubled nonprime sector. "Any servicer that has predominantly subprime credit quality loans in portfolio could find its timelines and overall cost to service facing increased levels not seen in recent history," she said.