Deteriorating performance at JPMorgan Chase & Co.’s mortgage servicing unit prompted a servicer rating downgrade.
The primary servicer ratings for prime and subprime residential loans were each downgraded to SQ2 from SQ1, according to a statement Thursday from Moody’s Investors Service. In addition, they remain on review for further downgrades as a result of deficiencies in Chase’s foreclosure process.
The highest possible rating is SQ1+, while SQ5- is the worst showing a servicer can have.
The downgrades impacted the servicer quality ratings of JP Morgan Chase Bank, N.A., and Chase Home Finance LLC.
The downgrades were affected by a deterioration of collection metrics relative to Chase’s peers. But the ratings agency did acknowledge that early-stage delinquency roll rates were an exception to the poor comparison.
Another factor influencing Moody’s was deterioration in foreclosure timeline metrics relative to the industry and ongoing operational challenges related to the regulatory environment.
“The company’s assessment for servicing stability was lowered to above average from strong which reflects the operational challenges Chase continues to face due to regulatory scrutiny and unprecedented levels of defaulted loans,” Moody’s stated.
Chase’s servicing portfolio stood at around 8.3 million mortgages for $1.19 trillion as of March 31.
