GMAC Mortgage, GMAC-RFC, Homecomings See Servicer Ratings Slashed, More Downgrades Possible

Fitch Ratings said late Friday that it has downgraded various servicer ratings associated with GMAC Mortgage, GMAC-RFC, and Homecomings Financial — all ResCap business units — and placed each servicer on negative ratings watch for further downgrades. GMAC Mortgage downgrades are summarized here. GMAC-RFC and Homecomings downgrades are summarized here. All three servicers are on negative watch for possible future downgrades, Fitch said. The rating agency said the servicer downgrades were the result of a downgrade of ResCap’s senior debt; Fitch recently downgraded ResCap’s credit rating to junk. Most HW readers likely understand this, but servicer rating downgrades are a much bigger deal than many outside of the industry might otherwise think. Most PSAs require a servicer to maintain a certain rating in order to have the right to continue to service various securitized mortgage pools, whether agency-backed or not. Ratings downgrades like this not only can hit the pocketbook in terms of the servicing portfolio, but also essentially make the cost of capital more expensive for future issues, since a servicer’s rating plays into the credit enhancement levels required by rating agencies during securitization.