OREANDA-NEWS. Fitch Ratings has downgraded The Bank of New York Mellon (BNY Mellon) U.S. residential master servicer rating to 'RMS2' from 'RMS1-', with a Stable Outlook.

The downgrade of BNY Mellon's master servicer rating reflects updates to Fitch's master servicer rating criteria published in April 2015 and takes into consideration the operation's low level of activity over the past eight years in new residential mortgage-backed securities (RMBS). Fitch's framework for analyzing master servicers focuses on effectiveness and operational capacity, servicer oversight, and data management. Within each of these three broad areas, Fitch evaluates a number of components to develop a comprehensive view of the master servicing operation. In the case of BNY Mellon, the increased emphasis on company and management experience and focus on responsiveness to RMBS issues had a negative impact on the overall assessment of the master servicing operation.

At 'RMS2', BNY Mellon continues to be a strongly rated master servicer that demonstrates high performance in overall master servicing ability. Fitch believes that BNY Mellon continues to maintain a capable servicing operation with the staff, procedures, controls, default management processes, and technology to manage its current servicing portfolio.

The rating action also reflects the financial strength of its parent, The Bank of New York Mellon, which is rated 'AA-/F1+' with a Stable Outlook by Fitch. Additional information on the parent is available at 'www.fitchratings.com'.

BNY Mellon's master servicing platform is headquartered in New Albany, OH with a second location in Pittsburgh, PA, which provides additional back-up capacity for its business operation. As of June 30, 2015, BNY Mellon master-serviced 43,950 loans totaling $6.5 billion versus 48,180 loans for $7.5 billion based on the June 30, 2014 review period. The current portfolio included 43,220 non-agency RMBS loans totaling $7 billion and 730 other loans totaling $7 million.

During the first quarter of 2014, BNY Mellon master servicing platform transitioned into the loan processing center of excellence (COE); in the prior year the group reported to the head of trade and loan operations. BNY Mellon indicated that the master servicing platform is expected to remain a distinct group under the new COE structure, providing stronger oversight over BNY Mellon's entire loan reporting functions and responsibilities. The master servicer indicated that this change reflects the need to complete ownership over all aspects of loan transactions, and to further develop and enhance economies of scale and maintain enterprise-wide best practices.

Fitch rates residential mortgage primary, master, and special servicers on a scale of 1 to 5, with 1 being the highest rating. Within some of these rating levels, Fitch further differentiates ratings by plus (+) and minus (-) as well as the flat rating. For more information on Fitch's residential servicer rating program, please see Fitch's report 'Rating U.S. Residential and Small Balance Commercial Mortgage Servicer Rating Criteria', dated April 23, 2015 which is available on the Fitch Ratings web site at 'www.fitchratings.com'.