December 19, 2011
(Excerpt from STANDARD & POOR'S RATINGS DIRECT®)
SN Servicing Corp. Residential And Small Balance Rankings
Affirmed; Outlook Is Stable
Standard & Poor's Ratings Services today affirmed its ABOVE AVERAGE rankings on SN Servicing Corp. (SNSC) as a
residential mortgage special and subprime servicer and affirmed its AVERAGE rankings on the company as a small
balance commercial servicer and special servicer. The outlook for all of the rankings is stable.
- We affirmed our ABOVE AVERAGE rankings on SN Servicing Corp. (SNSC) as a residential mortgage special and
subprime servicer, and affirmed our AVERAGE rankings on the company as a small balance commercial servicer and
- The outlook for all rankings is stable.
- The affirmed rankings as a residential subprime servicer and special servicer reflect the company’s fine
senior/middle management experience levels and tenure, good technology, proactive default methodologies, and
satisfactory internal controls.
- The AVERAGE small balance rankings are due to the lack of a formalized infrastructure or separation of
functionality for this product, as the company leverages its residential operation for many (though not all)
KEY RANKING FACTORS
- SNSC maintains a highly experienced management team and staff.
- The company's Servicer Evaluation Analytical Methodology (SEAM) statistics generally compare favorably
with other similar servicing peers that we follow.
- The formal training program, though not used frequently at present due to a lack of new hires, is, in our
view, thorough and provides employees with the requisite knowledge to perform their jobs.
- Loan boarding processes are well-controlled.
- The technology environment for default uses a proprietary application that we believe is robust and easily
updated to take into account changes in the marketplace or client needs.
- Default activities are appropriately proactive, and apply a single point of contact approach for its borrowers.
- The company has appropriate controls in place to manage its small balance loan portfolio.
We affirmed our ABOVE AVERAGE subrankings for management and organization as a residential subprime and special
servicer and also affirmed our AVERAGE rankings as a small balance commercial servicer and small balance commercial
special servicer. The overall loan administration subrankings are supported by ABOVE AVERAGE subrankings for residential
mortgage subprime servicing and special servicing, and AVERAGE subrankings for small balance commercial servicing and
small balance commercial special servicing. We consider the financial position to be insufficient.
- As previously mentioned, the small balance commercial portfolio infrastructure is not as formalized as for
the residential product.
- The portfolio has declined significantly over the past two years and management will face some challenges
in increasing it due to market conditions.
- The quality control plan only focuses on HUD loans and does not review other loan types, although this is
somewhat offset by another review that was undertaken in 2011.
SNSC’s residential portfolio has declined over the past two years, which resulted in concurrent staff reductions.
However, management is in the process of acquiring some small portfolios over the next 90 days and has other opportunities
to acquire and service assets from third-party clients. Additionally, the remaining staff still exhibit good experience
levels, in our opinion. The company has now combined its customer service area into the asset management area to further
increase efficiencies. SNSC’s policies and procedures remain satisfactory, in our view. The technology environment continues
to rely on its proprietary application for default functions, and it was enhanced somewhat over the past 18-months to provide
better tracking of loans in default.
SNSC’s internal auditing department reports to an auditing committee. The company has not yet implemented a quality
control audit of non HUD loans but plans to do so in 2012. Offsetting this, SNSC did have its auditors complete an SSAE 16
readiness review in preparation for an eventual full SSAE 16 review sometime in the future. SNSC continues to maintain fine
call center metrics, as reflected in data the company provided through Standard & Poor’s SEAM questionnaire. The company
relies on its existing residential infrastructure to service its small balance portfolio, although there are separate dedicated
people for certain functions. The company has satisfactory policies and default practices to manage its small balance portfolio.
Our outlook on SNSC is stable. SNSC is trying to increase both the residential and small balance portfolios through
third-party relationships. The company should also strengthen its internal control environment once it implements a QC review
of all loans in its portfolio. We expect SNSC to remain a competent residential mortgage subprime and special servicer and small
balance servicer and special in the marketplace. However, failure of the company to stabilize or increase the portfolio, as well
as implement a more robust quality control program, may result in a future ranking and/or outlook revision.
RELATED CRITERIA AND RESEARCH
- "Revised Criteria For Including RMBS, CMBS, And ABS Servicers On Standard & Poor's
Select Servicer List," published April 16, 2009.
- "Servicer Evaluation Ranking Criteria: U.S.," published Sept. 21, 2004.
- "Select Servicer List."