Financial institution of America servicer outlook revised to destructive by Fitch

Compliance concerns led Fitch Ratings to change the outlook for Bank of America’s residential servicing business, even as its latest review left classifications unchanged across products. 

While lauding technology services and management team at Bank of America, Fitch found fault with “recurring material instances of noncompliance” or MINCs, concerning required reporting and disclosures within the Charlotte, North Carolina-based bank’s residential mortgage-servicing operations. 

Specifically, Fitch cited issues concerning Item 1122 of the Securities and Exchange Commission’s Regulation AB in 2020 and 2021, and the Mortgage Bankers Association Uniform Single Attestation Program.

“The servicer indicated that it has instituted the necessary controls to address each MINC. Fitch will continue monitoring BANA’s effectiveness in resolving these issues,” the agency said in its commentary. Bank of America N.A. is a division of Bank of America Corp.

At the same time, Fitch affirmed ratings of RPS2+ for all of Bank of America’s U.S. residential primary residential servicing products: prime, Alt-A, subprime, HELOC and specialty servicing for second lien. The agency rates residential mortgage primary, master and special servicers on a scale of 1 to 5, with 1 being the highest rating with additional plus or minus designations for some scores. 

Investments to improve technology and systems, as well as effective portfolio management and sourcing, were highlighted as strong points in Bank of America’s servicing operations.

“The servicer evidences strong management team and staff, and highly developed enterprise risk management controls and processes,” Fitch also noted. Ratings took into consideration Bank of America’s financial support as well.

The bank also effectively managed its capacity planning in 2021 through utilization of existing third-party relationships and, where applicable, onboarding of new associates, Fitch said.

Bank of America pointed to a diminishing delinquent loan portfolio, which led to a decreased number accounts per servicing employee, for improvements in performance metrics. A transition to Black Knight’s mortgage-servicing platform, and enhancements made in its voice-response phone system and online self-service functions also contributed to stronger performance. 

At the close of the second quarter this year, Bank of America was servicing approximately 1.86 million loans totaling $316 billion, including close to 1 million loans equaling $220.4 billion owned by the bank. Agency loans numbered 726,800 and accounted for $75.9 billion of the portfolio, with another 94,200, or $14.8 billion worth, of nonagency RMBS mortgages on its books. Approximately 33,800 of other loan types totaled $4.8 billion.

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