MUFG Union Bank N.A. AVERAGE Ranking Affirmed As A Residential Mortgage Primary Servicer; Outlook Revised To Stable

  • We affirmed our overall AVERAGE ranking on MUFG Union Bank N.A. as a residential mortgage primary loan servicer.
  • As part of the ranking action, we raised our management and organization subranking to ABOVE AVERAGE from AVERAGE, and we affirmed our loan administration subranking as AVERAGE.
  • MUFG Union Bank N.A. is a primary loan servicer with its servicing operations located primarily in San Diego, Calif.
  • The outlook was revised to stable from positive.
NEW YORK (S&P Global Ratings) Feb. 4, 2019--S&P Global Ratings today affirmed 
its AVERAGE ranking on MUFG Union Bank N.A. (MUB) as a residential mortgage 
primary loan servicer. As part of the ranking action, we raised our management 
and organization subranking to ABOVE AVERAGE from AVERAGE, and we affirmed our 
loan administration subranking as AVERAGE. The outlook was revised to stable 
from positive.

Our ranking reflects:
  • The experienced senior and middle management teams with lower tenure compared to peers, due to organizational and portfolio growth;
  • A solid internal control environment with good technology that supports efficiency and effectiveness in the lines of defense;
  • No material internal or external audit issues noted;
  • A measured pace of year-over-year portfolio growth and the addition of two new states to the bank's portfolio geography;
  • Very low portfolio delinquency levels despite its continued growth;
  • The remediation of a prior observation to secure the payment processing function in a controlled access area;
  • Generally competitive servicing performance metrics with those of peer servicers we monitor; and
  • Elevated non-reimbursable tax penalties and call abandonment rates in customer service and collections.
Furthermore, as previously mentioned, we raised our management and 
organization subranking to ABOVE AVERAGE from AVERAGE due to the continued 
development and performance of MUB's internal control environment, the 
management team's stability and experience, and the bank's execution of its 
growth strategies. The results from compliance, quality control, and internal 
and external audits continue to note good results with limited findings. In 
addition, MUB's management continues to have success in maintaining a stable 
operation by limiting management and staff turnover, and continues to execute 
its growth strategies while maintaining low delinquency volumes.

Since our prior review (see "Servicer Evaluation: MUFG Union Bank N.A.," 
published Dec. 18, 2017), the following key changes and/or developments have 
occurred:
  • Expanded its geographic footprint into two additional states and completed additional mortgage servicing rights acquisitions and transfers;
  • Opened a second servicing site location in Texas;
  • Engaged an onshore vendor to automate the document-to-system data integrity reviews;
  • Transitioned to a vendor-sourced application to assist with quality control testing in the first line of defense;
  • Implemented call monitoring software with enhanced capabilities including screen capture; and
  • Completed various process improvements with robotics and automation.
We revised our outlook on the ranking to stable from positive. MUB has 
experienced senior and middle management teams, an appropriate level of 
technology and knowledgeable staff to support its operations, coupled with 
solid internal controls to identify and remediate issues. The bank has 
maintained low delinquency volumes with controlled portfolio growth as it 
continues to execute its growth strategies. We will continue to monitor MUB's 
portfolio growth, geographic expansion, and the opening of a new servicing 
location, which could bring additional challenges to the operations and 
servicing performance metrics. We believe MUB's management experience, the 
strength of its internal controls, and good servicing performance metrics 
should continue to provide a stable residential mortgage servicing operation.

The financial position is SUFFICIENT.