OREANDA-NEWS. S&P Global Ratings today raised its overall rankings on Ocwen Loan Servicing LLC (Ocwen) to AVERAGE from BELOW AVERAGE as a commercial mortgage special servicer as well as a small-balance commercial mortgage primary and special servicer. As part of the ranking actions, we raised our management and organization subrankings for all three rankings to AVERAGE from BELOW AVERAGE, and we affirmed our AVERAGE loan administration subrankings. The outlooks for all three rankings are stable.

Our rankings reflect our belief that the regulatory scrutiny Ocwen experienced in previous years has somewhat moderated. While such issues were limited to the residential servicing business, the magnitude of these problems within Ocwen's core business was a key factor to our June 18, 2015, downgrade of our commercial management and organization subrankings and our overall commercial rankings to BELOW AVERAGE (see "Ocwen Loan Servicing LLC Commercial Servicer Overall Rankings Lowered To BELOW AVERAGE; Outlook Stable," published June 18, 2015).

In light of the upgrades on all of Ocwen's residential servicing management and organization subrankings and overall rankings to AVERAGE on Aug. 9, 2016, we have similarly upgraded all three management and organization commercial servicer subrankings and overall commercial rankings (see "Four Ocwen Loan Servicing LLC Residential Servicer Rankings Raised To AVERAGE; Outlooks Are Stable" and "Ocwen Loan Servicing LLC Residential Master Servicer Ranking Raised To AVERAGE; Outlook Is Positive," both published Aug. 9, 2016).

Our rankings also reflect:Ocwen has an experienced and tenured management team, solid automation, sound policies and procedures, and improved internal controls;It is an experienced small-balance commercial mortgage servicer, notwithstanding steadily declining portfolio volume;Ocwen has demonstrated expertise in default management and asset management as a small-balance commercial servicer;Large-balance special servicing responsibilities do not include a full range of loan resolution and recovery activity, and its volumes also continue to decline;The company has strengthened its first and second lines of defense;The number and criticality of internal audit findings has declined in the servicing and default operations, though we still continue to note high - and medium-risk findings in the internal audits in key operations areas;While internal control challenges have been largely isolated to residential servicing operations, issues in Ocwen's core residential business are significant enough to affect the management and organization subrankings for all of Ocwen's commercial servicing platforms; andWe believe the challenges in the core business of residential servicing and the associated downsizing of that business could hamper the commercial servicing operations. Since our prior review, Ocwen has made these key changes:Created a risk committee at the board of directors level;Created an independent review committee of the board of directors to provide independent review, approval, and oversight of related party transactions;Added three new outside parties to the Ocwen Financial Corp. (OFC) board of directors: One was previously a Federal Housing Administration commissioner, the second previously served as the chief of the homeownership preservation office at the U. S. Department of the Treasury (who now acts as the chairwoman of the OFC board), and the third individual was previously a chief risk officer at an investment banking firm;Replaced the chief compliance officer (CCO) and several senior-level management positions reporting to the CCO;Hired 70 additional compliance staff members and further enhanced key components of the compliance management system;Replaced the chief internal auditor position with an existing industry-experienced internal staff member;Implemented a new system application to manage the organization, review, and approval processes of its policies and procedures;Completed the deployment of a governance, risk, and compliance system and tool used by all lines of defense to track and manage identified risk issues across the operations;Developed a mandatory risk management training program for staff; andHired a new manager for the small-balance commercial mortgage special servicing team (with 19 years of experience), and a new manager was appointed in primary servicing, an internal transfer from Ocwen's home retention group with seven years of experience. Our outlooks are stable for all three rankings. We believe Ocwen has strengthened its internal control environment and reduced the number and criticality of internal audit findings, and we believe the first and second lines of defense will continue to season to provide adequate risk management. In our view, Ocwen also continues to invest in staff, training, and technology to further develop its operations. The company's executive and senior management appears focused on the continued improvement of Ocwen's internal controls environment and loan servicing performance.

While not a direct concern for commercial servicing, we believe the regulatory outlook for Ocwen's residential platform is somewhat uncertain as the New York Department of Financial Services and California Department of Business Oversight have yet to resolve their monitoring activities. In addition, the National Mortgage Settlement monitoring activities will remain through 2017. We will continue to monitor the internal control environment's progress, as well as developments from the aforementioned regulatory and monitoring bodies. We believe new regulatory or investor issues, an increase in internal audit findings, or a degradation of the internal controls environment and service levels provided to borrowers could negatively affect our current rankings or outlooks, and we will take ranking actions as appropriate.

The financial position is SUFFICIENT, and we will add Ocwen to the Select Servicer List.