(The following statement was released by the rating agency)
Jan 15 - Fitch Ratings has affirmed Hypotheken Management GmbH’s (HM) German residential primary servicer rating at ‘RPS2’.
The rating reflects HM’s strong market position as one of the very few third-party residential mortgage servicers in Germany.
HM continues to benefit from the financial support of its parent, Schwaebisch Hall Kreditservice AG (SHK, unrated, prior to April 2012 trading as VR Kreditwerk AG), which itself is a subsidiary of Bausparkasse Schwaebisch Hall AG (‘A+'/Stable/‘F1+'). As a standalone entity, HM Group has demonstrated continued profitability over recent years with increasing revenue from its subsidiary MoRe Mobile Ressourcen GmbH (MoRe). SHK is part of the second-largest domestic retail banking group, Genossenschaftliche FinanzGruppe (GFG, the group). While HM benefits from mutual financial support, its activities are focused mainly on clients outside the group.
The gap left by the departure of HM’s managing director in June 2012 was filled within a short time by a highly experienced individual ensuring the continuity of HM’s operations. The impact of the change on the company’s strategy remains to be seen within the short to medium term.
The rating further reflects the innovative strategy in a challenging market environment where HM’s decreasing portfolio puts pressure on profit targets from servicing operations. HM’s subsidiary, MoRe, offers flexible resourcing and support for change projects to banks providing them with industry expertise and advice.
The rating also benefits from the strong focus on processes and procedures throughout the organisation, which is demonstrated by client specific procedures electronically documented within a centralised database and implemented in its process driven processing-platform. This is further supported by HM’s Internal Audit that fulfils the requirements of the German regulator for banks using a three-year risk-based audit approach with steady results.
HM faces challenges with staff turnover reaching its almost all-time peak at 20% in end-December 2011, despite the increase in operational staff’s company tenure reaching approximately six years. Fitch considers this is due to MoRe’s flexible resourcing model and the increasing external demand for qualified staff.
As at end-December 2011, HM’s primary servicing portfolio - including franchise clients - totalled approximately 160,000 loans with an outstanding principal balance of EUR10.0bn, a decrease from 185,000 loans and EUR11.9bn as of 31 December 2010.
Fitch employed its global and German servicer rating criteria in analysing the servicer’s operations and financial condition, with the former criteria including a comparison against similar German servicers as part of the review process.