In a year in which issuance in mortgage-backed securities has plummeted from previous years, many major market players are hoping to capitalize on their loan servicing platforms to increase revenue. Showcasing this trend is GMAC-Residential Funding Corp., which has become the first company to receive the rating RMS1 from Fitch, the top master servicer designation possible.

According to Bob Appel, a managing director at RFC, the company wants to use this rating to gain the attention of its investors and prove to other rating agencies that the Fitch rating was well-deserved.

"I think the main advantage from a servicing perspective as opposed to an issuer perspective is the added comfort of our investors that we are doing our job well, and have the capabilities to do an outstanding job on their behalf," Appel said.

"First of all, Fitch is one rating agency, and we need to demonstrate this to the others as well, to Moody's [Investors Service] and to S&P [Standard & Poor's Rating Service]," he said. S&P will be visiting RFC in October.

Despite the low MBS issuance this year on the public side, RFC's strong private placement activity has shifted the company's focus toward attracting investor demand for lower-credit quality product.

"Where investors have a greater appetite for lesser credit quality product, they'll feel more comfortable venturing into a lower credit grade than they might otherwise be if they know they've got a good servicing platform that is going to support these loans," Appel said.

For underperforming and non-performing assets, especially, investors tend to take a very proactive approach to their own investments, and appreciate RFC's commitment to providing a certain comfort level for these assets through its master servicing platform.

Furthermore, RFC hopes to explore the matter of making available its master and primary servicing platforms to other institutions. "So you've got the opportunity to extend master servicing and primary servicing and do this work for others and by having a strong rating from the agencies, you can leverage your investment and potentially pick up new business, that is third party business."

The master servicer rating, which Fitch rates from 1 to 5, with 1 being the highest, was based on the overall financial stability of GMAC, the experience of the management team, the broad range of integrated proprietary systems, quality of investor accounting and remitting and proactive loss mitigation/surveillance of servicer performance. A representative from Fitch did not return phone calls.

After achieving the top rating, there is only so much more that RFC can achieve. So, in order to stay on top, the company plans on adapting to the needs of its investors as they change over time.

"So we're investing in new systems and looking at new delivery of information so we can support the secondary market," Appel said. "If people see us supporting the secondary market, both in terms of providing information and in protection of the loans themselves - in terms of credit risk - by doing loss mitigation, they're more apt to buy the next issuance."

Market sources say that other large originators, such as Countrywide Credit Industries, are also planning to exploit the benefits of their servicing platforms.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.