OREANDA-NEWS. Fitch Ratings has upgraded Capita Mortgage Services Limited's (CMS; formerly Crown Mortgage Management) UK servicer ratings as follows:

UK Residential Primary (Prime) Servicer Rating upgraded to 'RPS2-' from 'RPS3+'
UK Residential Primary (Sub-prime) Servicer Rating upgraded to 'RPS2-' from 'RPS3+'
UK Residential Special Servicer Rating upgraded to 'RSS2-' from 'RSS3+'
UK Commercial 'Small Loans' Primary Servicer Rating upgraded to 'CPS2-(Small Loans)' from 'CPS3+ (Small Loans)'
UK Commercial 'Small Loans' Special Servicer Rating upgraded to 'CSS2-(Small Loans)' from 'CSS3+ (Small Loans)'

The servicer was acquired by Capita Plc (Capita) in May 2014 and subsequently integrated into the group and rebranded Capita Mortgage Services (CMS). The upgrades take into consideration that although the new ownership has been in place for less than two years at the time of review, there is evidence of strategic and operational support from the group; the UK's largest business process outsourcing provider. Fitch considers this positive for the servicer.

Support functions, which were previously part of CMS operations are largely managed at group level. CMS benefits from the well-developed functions a corporate group provides, most notably; the Internal Audit, Human Resources and technology teams. Continuity has been maintained through the transfer of key people from CMS to Capita or through maintaining a contact person at the servicer who liaises between the two entities.

A number of senior management changes have occurred following the change of ownership, and at the time of review the Managing Director, the Head of Operations and the Interim Chief Information Officer had all been with CMS for less than one year. Fitch believes such significant change at the most senior level of a company creates some risk. This is somewhat mitigated by the significant amount of experience that the new hires bring to the servicer, and the long-serving Commercial Director and Head of Compliance, who have an average company tenure of over 20 years.

Although neither Capita nor CMS have credit ratings assigned by Fitch, the agency's Corporates team conducted a review of Capita's financials, and considered them to be stable. The group's creditworthiness has been taken into account in assessing CMS's own financial condition, which remains somewhat volatile, and this is reflected in the ratings.

Servicing activities have been enhanced through a number of developments to the servicing platform, since 2013, which have provided CMS with greater automation and control. Processes have been reviewed and streamlined where possible and team structures have been changed to encourage better communication and cooperation. These changes have resulted in more efficient processing times and call performance statistics. CMS continues to evidence special servicing capability, using a variety of resolution strategies across residential and commercial loans.

As of end August 2015, CMS's residential primary servicing portfolio consisted of 37,983 loans (June 2013: 34,160) with a value of GBP2.3bn (GBP2.9bn). The residential special servicing portfolio consisted of 6,247 loans (4,053) with a value of GBP286m (GBP325m). The commercial primary servicing portfolio consisted of 814 loans (1,114) with a value of GBP839m (GBP950m). The commercial special servicing portfolio consisted of 106 loans (200) with a value of GBP272m (GBP472m).

The 'Small Loans' commercial servicer ratings denote a portfolio that includes assets of a semi-commercial nature and/or subject to business-related uses. The commercial ratings are based on experience of administering small ticket commercial mortgages.

Fitch employed its global servicer rating criteria in analysing the servicer's operations and financial condition, with the former criteria including a comparison of similar UK servicers as part of the review process.