Fitch Affirms Vesting Finance Dutch Servicer Ratings
20 Jun 2017 6:35 AM EST
•Dutch Residential Special Servicer affirmed at 'RSS2-'; off RWE
•Dutch ABS Primary Servicer Rating affirmed at 'ABPS2-'; off RWE
•Dutch ABS Special Servicer Rating affirmed at 'ABSS2-'' off RWE
Fitch has also withdrawn the company's Dutch Primary (Prime and Subprime) Ratings of 'RPS2-' and assigned the servicer a Dutch Primary Servicer Rating of 'RPS2-'.
The removal from RWE follows Fitch completing a full operational review after the acquisition of InVesting B.V., consisting of VFS and Focum Group B.V., by Arrow Global Investment Holdings Limited (Arrow Global).
The withdrawal of the Primary (Prime and Subprime) Ratings follows the update to Fitch's criteria report, which removed the distinction between prime and subprime loans for EMEA residential primary servicing activities (for further information, see 'Fitch Updates EMEA Servicer Addendum for Rating Structured Finance Servicer', dated 1 July 2016 at www.fitchratings.com).
The affirmations reflect that there have been no material changes to VFS's operations following acquisition. Fitch considers VFS to be a strategic fit for Arrow Global, which is good for the servicer's stability, and the servicer's strategy remains largely unchanged. There has been limited change at senior management level, with an average experience and company tenure which is low compared with rated peers. Overall staff turnover has increased to 23% from 7% in 2015, which is high. Fitch recognises that VFS has announced plans to relocate operations over the next two years, which may impact this figure in the short term.
The primary servicer rating takes into account that timeliness and control of loan boarding and administration, cash management and reporting activities are largely in line with similar rated servicers but also that VFS has limited recent portfolio boarding experience compared with the same servicers. VFS is unable to demonstrate the same level of call performance monitoring for customer services as seen at highly rated primary servicers. Fitch considers management of borrower enquiries is appropriate, but the agency's ability to assess and compare VFS's performance of these activities is limited and was factored into the rating.
The special servicer rating reflects that VFS continues to have good special servicing capabilities, offering various resolution methods and providing borrowers with a wide option of contact and payment methods. The timeline tracking and quality control technology is not as advanced as it at highly rated peers.
VFS' middle management team's average industry experience and company tenure compare well with peers. The average industry experience and company tenure at operational level is low compared with peers, which is reflected in the ratings. The number of training hours for new staff has increased and compares well with peers, following the introduction of a structured training academy. The number of training hours for existing staff remains low compared with peers. VFS was unable to provide some information regarding training programmes and the ratings reflect that Fitch's ability to assess and compare the training and development frameworks is limited as a result.
Fitch considers Vesting to operate a three-line defence risk management approach, which is industry standard, with a significant amount of quality control activity. A risk-based audit programme, with a dedicated and independent team, is complimented with ISAE3402 certification on a number of VFS's portfolios. The audit process is thorough, with a structured follow-up process in place.
Vesting deploys adequate technology. However the level of automation and control is not as advanced as at highly rated peers. Fitch acknowledges that this has been recognised by the servicer and will be addressed in the medium term. The servicer has a documented disaster recovery process in place but no test has been conducted since September 2015. As a result Fitch could not complete an assessment of its effectiveness.
At end-September 2016, Vesting's residential primary and special servicing portfolio totalled EUR1.99 billion (June 2015: EUR213.3 million), comprising 14,218 loans (June 2015: 4,645 loans). The unsecured portfolio totalled EUR3.15 billion (June 2015: EUR2.41 billion), comprising 335,116 loans (June 2015: 212,534 loans). Vesting is also the appointed back-up servicer on one unsecured portfolio of EUR734.6 million, consisting of 562,557 loans.
At the time of review, Vesting had acquired RNHB Hypotheekbank (part of FGH Bank, a fully owned subsidiary of Rabobank), which will see the servicer take on approximately 60 staff and a portfolio of around 8,800 accounts. As the integration process was not complete at the time of review, Fitch did not consider these loans as part of the servicer rating review
The rating action commentary is based on information provided to Fitch as of October 2016, unless stated otherwise.
The servicer rating is based on the methodology described in 'Rating Criteria for Rating Loan Servicers' dated 23 February 2017, which included a comparison of similar Dutch servicers as part of the review process.
For the original press release click here.