Fitch Affirms New American Funding's U.S. RMBS Servicer Rating

Fitch Ratings has affirmed the following primary prime servicer rating to New American Funding (NAF).

U.S. primary prime servicer rating 'RPS3'.

The Rating Outlook is Stable.

NAF's affirmed rating and Stable Outlook reflect the company's experienced management team and staff, enterprise-wide risk environment and compliance management system, satisfactory loan servicing performance and effective servicing technology.

RATING ACTIONS

Entity / Debt

Rating

Prior

New American Funding

RMBS Primary Prime Servicer

RPS3

Affirmed

RPS3

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VIEW ADDITIONAL RATING DETAILS

Key Rating Drivers

Broker Solutions Inc. d/b/a New American Funding (NAF) is a family-owned 'S' corporation under California law and is an independent mortgage lender based in Orange County, CA founded as a loan processing and underwriting consumer call center in 2003. The company is a Fannie Mae, Freddie Mac and Ginnie Mae direct lender, seller and servicer that operates its own builder and real estate-based lending divisions.

Historically, the company originated loans that were sold or sub-serviced by a third party. In 2014, management decided to bring all servicing in-house and assembled a servicing team to build the necessary systems and processes. The company's loan servicing business is headquartered in Austin, TX and has 233,350 loans under management totaling $52.5 billion. Management represents that about 60% of new loan origination business is sourced through its retail channel while about 40% is sourced via its call center operations. The company is cautiously expanding into non-QM lending and looking at opportunistic sub-servicing arrangements to diversify revenue

NAF's loan servicing performance metrics are generally competitive with industry peers. Call center performance metrics are highly competitive with industry averages. Collection and loss mitigation efforts are acceptable overall. Foreclosure case handling, tracking and performance monitoring are efficiently managed and the REO process is well-controlled.

NAF has a highly developed compliance management system that includes quality control, audit, compliance, as well as litigation management and vendor oversight. A review of the audit schedule and findings as well as quality control reports indicates that it is a sufficiently robust process. A review of recent audit reports identified some issues that audit will be re-testing and validating in subsequent quarters. A review of the company's most recent USAP report indicated no significant issues.

NAF adopted a new risk-based testing program in January, 2022, after Fitch's last review. The testing program is designed to validate regulatory change implementation and corrective action remediation and to test specific risk topics derived from complaints, internal audits and third-party auditors. The company reported receiving only 35 CFPB-referred complaints during the annual period ending June 30, 2022 with no statutory delays.

Fitch does not publicly rate NAF's credit and financial strength. However, Fitch's financial institutions group reviewed NAF's financial statements to provide an internal assessment, as a company's financial condition is a component of Fitch's servicer rating analysis.

As of June 30, 2022, NAF's loan servicing portfolio consisted of 233,350 loans representing an unpaid principal balance of $52 billion. The servicing portfolio by investor distribution consists of Fannie Mae (48%), Freddie Mac (15%), Ginnie Mae (29%), NAF-owned (4%) and third-party servicing (4%) loans. Management indicated that a business strategy consisting of non-QM originated loans as well as third-party subservicing and opportunistic acquisitions forms a part of NAF's future business plan. NAF does not outsource any servicing functions offshore.

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 'Criteria for Rating U.S. and Canadian Residential and Small Balance Commercial Mortgage Service,' dated February 2020.

Additional information is available on www.fitchratings.com