Vertex put on negative watch after DB Mortgages cancels its contract
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DB Mortgages has terminated its servicing contract with Vertex Mortgage Services a year early and switched to Target Loan Servicing.
The former sub-prime lender will transfer its £1.6bn mortgage book by November 2012, which makes up roughly 60% of Vertex’s portfolio.
As a result, Vertex’s UK residential mortgage primary servicer ratings of RPS2-sub-prime and RPS2-prime have been placed on rating watch negative by Fitch.
Negative watch implies the servicer ratings will be either downgraded or affirmed following monitoring of the situation during the next six months.
Fitch believes the loss of the portfolio may adversely affect Vertex from an operational perspective.
But it says given that Vertex signed a contract with Tesco in 2010 to provide origination and mortgage administration services once it starts lending in 2011, the impact of decreasing assets under management could be limited depending on origination volumes.
The transfer will not affect Vertex’s servicing activities for its remaining three clients and 8,700 loans, estimated to be worth £1.1bn.
A spokesman for Vertex says: “Vertex can confirm that Deutsche Bank has exercised a ’termination for convenience’ clause in its contract. As a result the contract to supply administration services is now scheduled to conclude in November 2012, a year earlier than the original end date.
“Vertex continues to provide a range of services for mortgage and non-mortgage clients in the financial services sector.”
Talks are believed to have broken down between Vertex and Skipton Building Society over the acquisition of the society’s third party mortgage servicer subsidiary HML.
The Financial Services Authority fined DB Mortgages, part of the Deutsche Bank Group, £840,000 in February for irresponsible lending practices and unfair treatment of customers in arrears.
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