TEXT-Fitch affirms Crown's UK servicer ratings

(The following statement was released by the rating agency)

Oct 1 - Fitch Ratings has affirmed Crown Mortgage Management Limited's (Crown) UK servicer ratings as follows:

UK Residential Primary (Prime) Servicer Rating affirmed at 'RPS3+' UK Residential Primary (Sub-prime) Servicer Rating affirmed at 'RPS3+' UK Residential Special Servicer Rating affirmed at 'RSS3+' UK Commercial 'Small Loans' Primary Servicer Rating affirmed at 'CPS3+' UK Commercial 'Small Loans' Special Servicer Rating affirmed at 'CSS3+'

The ratings reflect an increasing portfolio of assets under management. Despite challenging market conditions Crown's residential mortgage portfolio more than doubled in size (by value) to GBP3.58bn from GBP1.78bn within the 13 months between end-May 2011 and end-June 2012. This growth was mainly driven by the take-on of a large equity release portfolio.

A key driver of the ratings is Crown's focus on change management. Crown created the role of Chief Information Officer, which was filled by a highly experienced professional at end-April 2012. This demonstrates Crown's commitment from the top of the organisation to enhance its operations and technology, although the impact on operations will become more measurable over the coming 12 months.

Crown is not rated or part of a rated institution, and continues to enjoy the financial support of Forum Partners Europe (UK) LLP. Crown's financial performance as a standalone entity continues to improve with both net operating margin and liquidity ratio showing an upward trend for the latest financial year.

The ratings also take into consideration staff turnover, which at 20.7% is considerably higher than the previous year (9.7% for commercial group and 13.4% for residential group) albeit still in line with rated peers. Crown's average training hours exceed Fitch's recommended benchmark of 40 hours. This is further backed up by continuous improvements to Crown's training programmes, including succession planning through the recently embedded 'rising stars' programme.

The 'Small Loans' commercial servicer ratings denote a portfolio that includes assets of a semi-commercial nature and/or subject to business-related uses. These loans may have full recourse to individual borrowers and an outstanding principal balance of generally less than GBP2m with individual loans ranging from GBP4,000 to GBP43m. The commercial ratings are based on experience of administering small ticket commercial mortgages, senior management's extensive industry experience, good technology and a sound internal control environment.

As of end-June 2012, Crown's servicing portfolio totalled GBP5.14bn, up from GBP3.47bn in May 2011. This comprised 54,819 loans, compared with 23,608 loans in May 2011. The residential mortgage portfolio included 48,077 loans totalling GBP3.58bn, while the remaining portfolio included small balance commercial loans totalling GBP1.56bn. Crown is named special servicer on 71% of its residential portfolio (by value) whereas it is the named special servicer for all of its commercial loan book. In addition, Crown has taken on standby contracts (warm and cold) of GBP 8.4bn, which given its operational size, may cause capacity issues if several contracts are invoked at the same time. According to Crown, the current approach managing the exposure to standby contracts with limits by servicer, jurisdiction, asset type and issuer reduces the risk that it would be unable to meet its commitments. Crown has also made a concerted decision to no longer take on cold standby contracts.

Fitch employed its global and UK 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.

Additional information is available at

. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable criteria 'Global Rating Criteria for Structured Finance Servicers', dated 13 August 2010, and 'Rating Criteria for European Mortgage Loan Servicers - UK Market Addendum', dated 28 January 2008, are available on


Applicable Criteria and Related Research: Global Rating Criteria for Structured Finance Servicers Rating Criteria for European Mortgage Loan Servicers - UK Market Addendum (UK European Structured Finance)

(New York Ratings Team)

((e-mail: pam.niimi@thomsonreuters.com; Reuters Messaging: pam.niimi.reuters.com@reuters.net; Tel:1-646-223-6330;))