Standard & Poor's | Americas 12/19/18, 4)40 PM

(/en_US/web/guest/home)

Servicer Evaluation: Ocwen Loan Servicing LLC

30-Dec-2013 11:29 EST
View Analyst Contact Information
Table of Contents
Key Ranking Factors
Opinion
Outlook
Profile
Management And Organization
Loan Administration–Master Servicing
Financial Position
Related Criteria And Research

Ranking Overview
--Subrankings--
Overall rankingManagement and organizationLoan administration Outlook
Residential master servicerABOVE AVERAGEABOVE AVERAGE ABOVE AVERAGE Developing
Financial position Su!cient

Key Ranking Factors

Strengths:

Ocwen has maintained GMAC Residential Funding's very experienced line management and infrastructure.
There are significant enhancements in the primary servicer scorecards.
Ocwen continues to adjust servicer oversight to manage servicer issues--such as increased modifications and other loss-mitigation alternatives--using data to monitor default and loss mitigation
issues.
Ocwen addresses issues outside of pooling and servicing agreements (PSAs) such as servicer responsibilities under regulatory requirements, including national mortgage settlements, consent orders,
and Consumer Financial Protection Bureau (CFPB) rules.

Weaknesses:

In past acquisitions, Ocwen closed sites and o"shored responsibilities; we believe a change in the current management and infrastructure could hurt its performance as a master servicer. Ocwen's
senior management (above the master servicing team) is new to master-servicing responsibilities, and to overseeing its own primary servicing operation.

Opinion
Standard & Poor's Ratings Services' ranking for Ocwen Loan Servicing LLC (formerly GMAC Residential Funding Co. LLC) is ABOVE AVERAGE as a residential mortgage master servicer. The ranking
reflects our opinion of Ocwen's seasoned management and sta", solid internal controls and risk management, thorough policies and procedures, and appropriate default management.

Ocwen purchased GMAC Residential Funding Co.'s (RFC's) master servicing platform in February 2013; it did not previously have a master servicing operation. It retained substantially all of the senior
management team and most of the master servicing sta" and infrastructure. The operation is managed through Ocwen's master servicing group.

We transferred and a!rmed our ABOVE AVERAGE master servicer ranking for RFC to Ocwen, and issued a developing outlook; we withdrew our master servicer ranking for RFC.

As a master servicer, Ocwen monitors the administration of residential mortgage loans conducted by primary loan servicers, and safeguards the interests of securities holders in mortgage-backed
securities collateralized by the residential loans under management. Ocwen has the technology and infrastructure to e!ciently compile and consolidate loan-level data directly from its servicers, and
monitor servicer compliance regarding applicable regulations and prudent loan servicing standards. Ocwen also ensures that primary servicers adhere to specific investor requirements.

Ocwen significantly enhanced the scorecards it uses to evaluate servicer performance based on key performance metrics related to foreclosure, loss mitigation, real estate-owned, and bankruptcy. It
also supplies a version of the scorecard to each servicer for comparison with peers (without individually identifying them).

Ocwen initiates dialogues with servicers about compliance with changes agreed to with regulators, including new rules established by the CFPB (to be implemented in January 2014). It also monitors
loan modification limits and reviews policies, such as stopping advances on nonrecoverable loans.

After recent servicing acquisitions in the mortgage industry and a 2010 U.S. Treasury Department directive, alternate methods have been used di"erent master servicers, servicers, and
trustees/administrative agents in the reporting of loans with forbearance modification. As a master servicer, and as a securities administrator, Ocwen followed this directive and allocated Home
A"ordable Modification Program (HAMP) principal forbearance modifications as a realized loss to the related trust; however, non-HAMP principal forbearance modifications were not reported as losses,
and therefore not allocated as losses to the related trusts.

Outlook
Our outlook is developing. Ocwen will continue investing in technology to refine workflow processes and reduce servicing costs, while managing the current portfolio. We believe it is important for
Ocwen to display a commitment to the experienced management team currently supervising the operation. We also believe a master servicer has a unique role in overseeing the primary servicing
operation of its a!liate in a manner that is independent, and in the interest of the securitization trusts and securities holders. The master servicing management Ocwen retained had this experience at
RFC; it remains to be seen whether that independence from Ocwen's senior management continues. We expect Ocwen to serve as a high-quality residential loan master servicer if future enhancements
are similar to those for the new scorecards. Ocwen would like to increase the volume of master servicing services on transactions to entities outside of it.

Key changes since our last review

RFC's master servicing operation was acquired by Ocwen Loan Servicing LLC.
The acquisition brought Ocwen improved financial strength.
Significant enhancements to master servicing scorecards have that evaluate servicers resulted in a higher level of oversight.

https://www.standardandpoors.com/en_US/web/guest/article/-/view/sourceId/8392825 Page 1 of 4
Standard & Poor's | Americas 12/19/18, 4)40 PM

Profile
Servicer Profile
Master servicing location Burbank, Calif.
Loan servicing system SBO 2000
Portfolio type RMBS master servicer
As of Dec. 31, 2012
No. of servicing employees 47
Volume (unpaid principal balance, mil. $)$54,327
Loan count (no.) 409,404
Ocwen Financial Corp. was established in 1988; it went public in 1996. Headquartered in Atlanta, it has domestic servicing centers in West Palm Beach, Fla. (537 sta"); Fort Washington, Pa. (433);
Waterloo, Iowa (790); Dallas, (711); Houston (198); and Orlando (26). It also has o"shore captive servicing centers in Bangalore, Mumbai, and Pune, India (with almost 5,000 sta"). Ocwen has serviced
loans in India for 12 years.

Ocwen has integrated several significant servicing portfolios by acquisition of facilities and MSRs; purchases include Litton, Saxon Mortgage Services, and Homeward Residential Holding Inc. Ocwen
acquired Genworth Financial Home Equity Access Corp., a reverse mortgage originator and servicer. Ocwen is an approved servicer for Freddie Mac and Fannie Mae, and is an approved issuer of Ginnie
Mae MBS.

We reviewed Ocwen's Bangalore and Mumbai o"shore operations (the customer contact center and loss mitigation departments). The master servicing business is not currently supported at this site.

Management And Organization

The ranking for management and organization is ABOVE AVERAGE.

Management and sta" recruitment, development, and training

Ocwen has a highly seasoned management team with minimal turnover, contributing to a stable master servicing environment.

Senior managers are highly tenured (averaging 20 years' industry experience and 12 years with the company).
Middle managers are well-seasoned (27 years' industry experience and 13 years tenure).
Total annualized turnover is zero for managers and 2% for sta"—excellent, compared with other master servicers we monitor.
We believe Ocwen has well-structured training programs for new hires, and continuing education initiatives for experienced sta". It has a dedicated training sta", various training resources online, and
external training opportunities via seminars and conferences from industry associations and vendors. Ocwen also heavily emphasizes departmental training, including on-the-job mentoring through
peers and supervisors, and provides extensive cross-training to develop multitasking expertise.

Internal controls

Policy and procedure manuals for all areas of master servicing are comprehensive and fully annotated, with narrative and functional instruction, available in electronic and hard copy formats, all
available via Ocwen's intranet. The review and approval of tasks and procedures is strictly controlled by user rights. All business units review and revise policies, procedures, and workflow functions for
consistency and timeliness. The master servicer also revised its procedures to monitor changes in loss mitigation processes, including the U.S. Treasury's HAMP program. All 255 master servicing
procedures were updated in 2012.

Ocwen master servicing's initial audit started in May; the audit was completed subsequent to our review, with no significant findings reported. We believe the audit and risk assessment structure is
comprehensive and well designed. The audit group is independent of servicing, and reports to the audit committee; the audit scope identifies key areas of risk and approves an audit plan annually.
There are proper plans for remediation, and management is responsible for follow up. Our review of 2012 REG AB and USAP showed no material findings.

The master servicer's policy is to advance to a recoverability standard for principal and interest (specified in its pooling and servicing agreements); it is aligning recoverability standards with Ocwen,
and believes the policies are similar.

Technology

Ocwen operates in a superior automated environment, with highly e!cient systems architecture for key master servicing functions, and disaster recovery and business continuity planning.

Ocwen uses Alan King & Co.'s SBO 2000 system (used by most servicers in the RMBS master servicing industry);
The system captures all relevant data necessary for loan-level reporting for securitizations; and
It provides audit capability to integrate general ledger, audit, and historical information.
The disaster recovery plan and business continuity plan include the identification and hierarchy of critical tasks, business resumption timeframes, and a calling tree for key personnel. A hot site has
been established in Cypress, Calif., using SunGard. Ocwen tested its call tree exercises, workplace recovery, and disaster recovery in the past six months. It also has network and data security and
testing, tape back-up, rotation storage/recovery, and capacity/scalability monitoring in place; testing of all back-up and continuity (required annually) was completed in 2012.

Master servicing

A senior vice president oversees the master servicing division (primarily located in Burbank); as of December 2012, the master servicing portfolio totaled approximately $52 billion, or over 388,000
loans. Ocwen oversees 36 servicers, but approximately 95% of its portfolio is vested among five servicers (approximately 84% at Ocwen). It is the master servicer for approximately 550 securitizations,
240 whole loan transactions, and 15 third-party responsibilities. We believe the company minimizes risk of loss to investors in various securitized transactions by ensuring that the subservices
prudently are performing loan administration duties; it has not indicated any future additions to its portfolio.

Loan Administration–Master Servicing

The subranking for master servicing loan administration is ABOVE AVERAGE.

The loan operations group reviews the monthly servicer reports, audits loan servicer data, reconciles data and cash variances, and oversees claim processing. The collection of servicer data includes
remittances, loan payo"s, curtailments, and real estate owned (REO) property dispositions. Approximately 100% of all servicer data is reported electronically. The data are loaded into the SBO 2000
servicer system, scrubbed, and validated against the actual and scheduled balances for the month. A cash analysis tool performs online reconciliations and generates variance reporting on an
exception basis, and there are detailed random custodial account reviews.

Loan accounting and claims administration

The claims administration group is responsible for reimbursing servicer principal and interest expense advances, accounting for REO property disposition sale proceeds, calculating net gain or loss on
REO sales, and enforcing servicer guide expense and time limits. Ocwen has made a concerted e"ort to implement controls to ensure the accuracy of loan modification data, including the creation of a
universal loan modification reporting template to electronically upload modification data.

The loan accounting group is responsible for validating servicer remittances, reconciling loan-level data to pool-level data and pool-level data to deal-level data, disbursing funds to the securities
administrator group, recording activity to the general ledger, reconciling the clearing and custodial accounts, and reviewing and generating cash disbursements, all of which must be cleared in 48
hours. The group also performs random and targeted custodial account reviews, including validating that they are titled correctly, with eligible institutions. The universal loan modification report
allows electronic reporting of related data for all programs, including HAMP. The group also calculates P&I payo" amounts due from servicers.

We believe the group is very focused on ensuring a controlled environment, validating loan modification data, and has a template for servicers to electronically load loan modification data. It also
monitors the scorecards of servicers with unsatisfactory performance.

https://www.standardandpoors.com/en_US/web/guest/article/-/view/sourceId/8392825 Page 2 of 4
Standard & Poor's | Americas 12/19/18, 4)40 PM

Since our last review, the group has brought the claims process (formerly handled by a vendor) in-house. Reporting of daily volume and aging of claims has been enhanced by more detailed, relevant
metrics, to work with servicers to analyze trends for process improvements.

Investor reporting and bond administrations

The securities administration group handles bond analytics and bond administration functions (see table 1). Ocwen maintains a nationally recognized waterfall calculation tool for a risk management
validation of proper cash flows. The group is responsible for new deal modeling, investor reporting, and deal compliance, among other tasks. It also creates a distribution calculation model and is
responsible for its validation. This role is traditionally performed by the trustee; however, Ocwen performs the waterfall calculation and directs the trustees to make payment on a tranche and deal
level.

Table 1
Ocwen Loan Servicing LLC--Total Portfolio
No. of loansTotal unpaid principal balance (000 $)30-59 days (%)60-89 days (%)90+ days (%)Total delinquency (%)Foreclosure %Bankruptcy %Real estate-owned (no. of loans)
2012388,265 52,702,495 6.97 2.60 4.04 13.60 6.02 3.16 686
2011457,736 63,534,899 5.82 2.38 3.41 11.61 6.53 2.87 3,265
2010558,814 78,285,855 5.81 2.47 3.83 12.11 6.31 2.58 6,059
2009487,240 81,842,265 6.55 3.32 7.00 16.87 8.64 3.00 3,842
2008644,125 105,502,444 6.90 3.30 4.88 15.08 4.41 3.14 11,533
2007965,129 162,635,190 5.12 5.71 4.55 15.38 2.90 1.94 15,152
Investor remittances are generated via wire that the bond administration group initiates (see table 2). A Web site lets investors view pertinent pool and loan level data on various securities. The group
also monitors advancing requirements and assesses stop advance policies. Users can also access various reports, specific deal features, and other corporate information. Overall, Ocwen has the
requisite technology, management depth, and internal controls to process and reconcile servicer data and remittances, perform timely and e!cient account balancing, and process claims in an
expedient manner. It reviews and certifies all master servicing bank accounts and deal level custodial accounts. Segregation of duties is properly maintained and management provides oversight of
variances.

Table 2
Investor Classification
Portfolio Investors Units (%)
Mortgage-backed securities96.98
Portfolio 0.40
Total other 2.30
Fannie Mae 0
Freddie Mac 0.32

Servicer management and compliance

The servicer management group performs all compliance functions, including servicer certification and audits (see table 3). Servicers must be approved and renewed on an annual basis pursuant to
Ocwen's servicer guide. Each servicer is ranked monthly based on key measures including cash and data; meeting foreclosure timelines and liquidation severity; and loss mitigation e!ciency and
success. Ocwen maintains a rules database to monitor PSA and servicing guide compliance. They are also implementing processes to monitor CFPB rules related to forced placed insurance for
escrowed accounts.

Table 3
Top Five Servicers (%)
Ocwen Loan Servicing LLC83.28
PNC Bank N.A. 4.80
WELLS FARGO BANK NA 4.62
SunTrust Mortgage Inc. 1.01
Bank of America N.A. 0.98
Other 5.32
Ocwen updates the servicing guide periodically via electronic bulletin and the guide is available on its Web site for invstor and servicer use. The annual certification process mandates that a servicer
must submit updated information including financial statements, a Uniform Single Attestation Program (USAP) statement, and insurance information. Exception reports indicate those servicers that are
not in compliance with standards as established in the servicer guide. Outstanding certification issues are monitored, and, according to the age of the item, may be escalated for management review.

Ocwen has processes in place for adding new servicers. It conducts an on-site review and operational assessment that covers each servicer's eligibility as well as policies and procedures. The company
significantly enhanced the scorecards it uses to evaluate servicer performance based on key performance metrics related to foreclosure, loss mitigation, real estate-owned, and bankruptcy. It also
supplies a version of the scorecard to each servicer for comparison with peers (without individually identifying them).

The servicer compliance team performs servicer audits based on the new servicer scorecards it has developed the criteria for generating a servicer audit. The audit selection criteria are primarily based
on risk exposure, including performance, portfolio size, and special circumstances.

Ocwen's focus is on defaulted loans with no borrower contact and significant delinquencies. These data are presented to the servicers in the revised scorecards, which provide performance
comparisons to their peers. The group also looks at audit and compliance results and company financials, and monitors the necessity to step in and provide backup advancing. The goal is to
encourage positive behavior change of servicers by presenting them peer comparisons.

Once the audit is complete, Ocwen issues a preliminary audit letter, works with the servicer on exceptions, then issues a final letter, with a rating of satisfactory, unsatisfactory, or needs improvement.
It will also place a servicer on watch, based on financial situation or occurrences in the market.

Ocwen monitors desktop audits on all servicers throughout the year, and trend analysis dictates if a servicer will appear on a watch list. Watch list inclusion may determine whether it conducts a site
review. The servicer compliance group issues reports of its findings to servicers and tracks deficiencies through resolution. Ocwen planned to complete eight full and one limited servicer audits, and
one REO audit in 2013, covering approximately 97% of the portfolio. Ocwen's audit process includes:

Compliance with its master servicing guide;

A review of policies and procedures;
An onsite review that compares loan-level findings with policies and procedures;
A review of managements responses; and
A review of loss mitigation decisions.
In our opinion, Ocwen's audit process is an extremely important mechanism for proactively managing servicing risk, and provides investors with added security in the administration of the underlying
mortgage collateral. Overall, Ocwen has implemented well developed controls and workflow methodologies in its servicer compliance area.

Individuals in the default review area are responsible for monitoring portfolio delinquency rates and providing guidance and support for loss mitigation and foreclosure recommendations to servicers.
Default desktop reviews are generally performed at the master servicer and are focused on portfolios with higher delinquencies. Ocwen expects continued portfolio risk because the mix of subprime
and home equity loans has increased, and there is a general deterioration of performance of residential mortgage portfolios. In our opinion, the default management group has solid servicer oversight
methodologies in place to identify and resolve delinquent loans.

https://www.standardandpoors.com/en_US/web/guest/article/-/view/sourceId/8392825 Page 3 of 4
Standard & Poor's | Americas 12/19/18, 4)40 PM

Ocwen has online access to collection data via a direct link to several of its largest servicers, including its own primary servicer. It encourages servicers to maintain a proper balance between pursuing
loss mitigation and disposition opportunities--processing the foreclosure when necessary. Ocwen ranks servicers based on their scorecards parameters, which incorporate data quality and their loss
mitigation e"orts as a percentage of eligible loans and as compared with the loans that become REO.

Financial Position
The financial position is Su!cient.

Related Criteria And Research

Related Criteria

Revised Criteria For Including RMBS, CMBS, And ABS Servicers On Standard & Poor's Select Servicer List (http://Revised Criteria For Including RMBS, CMBS, And ABS Servicers On Standard & Poor's Select
Servicer List), April 16, 2009
Servicer Evaluation Ranking Criteria: U.S. (http://Servicer Evaluation Ranking Criteria: U.S.), Sept. 21, 2004
Todd N Niemy, New York (1) 212-438-2494;
Servicer Analyst:
todd.niemy@standardandpoors.com (mailto:todd.niemy@standardandpoors.com)
Robert F Mackey, New York (1) 212-438-1268;
Secondary Contact:
robert.mackey@standardandpoors.com (mailto:robert.mackey@standardandpoors.com)
No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse
engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its
a!liates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, o!cers, shareholders, employees or
agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or
otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis.
S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE,
FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE
CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal
fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the
possibility of such damages.

Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses
and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of
any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and
experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except
where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent
verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not
limited to, the publication of a periodic update on a credit rating and related analyses.

To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign,
withdraw or suspend such acknowledgment at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal or suspension of an
acknowledgment as well as any liability for any damage alleged to have been su"ered on account thereof.

S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P
may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in
connection with each analytical process.

S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses.
S&P's public ratings and analyses are made available on its Web sites, www.standardandpoors.com (http://www.standardandpoors.com) (free of charge), and www.ratingsdirect.com
(http://www.ratingsdirect.com) and www.globalcreditportal.com (http://www.globalcreditportal.com) (subscription), and may be distributed through other means, including via S&P publications and
third-party redistributors. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees (http://www.standardandpoors.com/usratingsfees).

Any Passwords/user IDs issued by S&P to users are single user-dedicated and may ONLY be used by the individual to whom they have been assigned. No sharing of passwords/user IDs and no
simultaneous access via the same password/user ID is permitted. To reprint, translate, or use the data or information other than as provided herein, contact S&P Global Ratings, Client Services, 55
Water Street, New York, NY 10041; (1) 212-438-7280 or by e-mail to: research_request@spglobal.com (mailto:research_request@spglobal.com).

Legal Disclaimers (/en_US/web/guest/regulatory/legal-disclaimers)

Careers at S&P Global Ratings (https://www.spglobal.com/en/careers/overview)
Terms of Use (/en_US/web/guest/regulatory/termsofuse)
Privacy and Cookie Notice (/en_US/web/guest/regulatory/privacy-notice)
Copyright © 2018 Standard & Poor's Financial Services LLC. All rights reserved.

Reproduction and distribution of this information in any form is prohibited except with the prior written permission of Standard & Poor's Financial Services LLC and its a!liates (together, “S&P”). S&P
does not guarantee the accuracy, completeness, timeliness or availability of any information, including ratings, and is not responsible for any errors or omissions (negligent or otherwise), regardless of
the cause, or for the results obtained from the use of such information. S&P GIVES NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE OR USE. S&P shall not be liable for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal
fees, or losses (including lost income or profits and opportunity costs) in connection with any use of this information, including ratings. S&P ratings are statements of opinions and are not statements
of fact or recommendations to purchase hold or sell securities. They do not address the market value of securities or the suitability of securities for investment purposes, and should not be relied on
as investment advice. Please read our complete disclaimer here. (/en_US/web/guest/regulatory/legal-disclaimers)

https://www.standardandpoors.com/en_US/web/guest/article/-/view/sourceId/8392825 Page 4 of 4