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Fitch Affirms Residential Credit Solutions, Inc.'s U.S. RMBS Servicer Ratings

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10/07/2013 | 06:22pm CET

Fitch Ratings has affirmed the following U.S. residential primary servicer ratings for Residential Credit Solutions, Inc. (RCS):

--U.S. Residential primary servicer rating for subprime product at 'RPS2-'; Outlook Stable;
--Special servicer rating at 'RSS2-'; Outlook Stable.

The rating affirmations and Stable Outlook reflects the strength of RCS's high-touch servicing model that consists of low accounts per loss mitigation agent; continued effective default capabilities to establish contact with borrowers resulting in improved delinquency roll rates and resolution of defaulted loans; and enhanced efficiencies in loan administration functions. Specifically those functions resulting in effectively managing borrower information during the on-boarding of loan transfers to ensure quicker identification of issues, while also enabling the servicer to quickly identify the appropriate default servicing department (i.e, single point of contact, foreclosure) to best assist the borrower.

However, the ratings also reflect the delayed improvements to the servicer's internal audit department. While the internal audit program is performed by a sole auditor possessing significant industry experience and six years tenure with the company, Fitch is concerned that the limited resources in this area creates significant challenges to maintain the annual auditing of servicing functions. In addition, the impending Consumer Financial Protection Bureau rules, effective January 2014, will expect additional auditing requirements of servicers. The servicer acknowledged this concern and stated it anticipates hiring additional staff within the coming months. Fitch will expect to see the full staffing and coverage of the auditing plans in the servicer's next annual review in order to remove this as a concern.

The ratings also take into consideration the financial condition of RCS, a non-rated Fitch entity, as financial condition is a component of Fitch's servicer ratings.

Finally, the ratings also reflect Fitch's overall concerns for the U.S. residential servicing industry, which include the ability to maintain high performance standards while addressing the rising cost of servicing and changes to industry practices mandated by regulators and other parties.

RCS operates its servicing platform from Fort Worth, TX with a servicing staff of 232 full-time equivalents (FTE) at the time of the review. The company's strategy remains focused on credit-sensitive and servicing-intensive residential mortgage assets. As of June 30, 2013, RCS's servicing portfolio consisted of more than 49,000 loans totaling $8.2 billion. The current portfolio contains approximately 20,000 subprime first and second lien mortgage loans totaling approximately $4.3 billion and 27,000 government sponsored entity loans totaling approximately $3.5 billion. RCS's portfolio consists of approximately 93% under special servicing arrangements.

Fitch rates residential mortgage primary, master, and special servicers on a scale of 1 to 5, with 1 being the highest rating. Within some of these rating levels, Fitch further differentiates ratings by plus (+) and minus (-) as well as the flat rating. For more information on Fitch's residential servicer rating program, please see Fitch's report 'Rating U.S. Residential and Small Balance Commercial Mortgage Servicer Rating Criteria', dated Jan. 31, 2011 which is available on the Fitch Ratings web site at www.fitchratings.com.

Additional information is available at www.fitchratings.com.

Applicable Criteria and Related Research:
--'Rating Criteria for Structured Finance Servicers' (Feb.6, 2013);
--'U.S. Residential and Small Balance Commercial Mortgage Servicer Rating Criteria' (Jan. 31, 2011).

Applicable Criteria and Related Research:
Global Rating Criteria for Structured Finance CDOs
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=718027
U.S. Residential and Small Balance Commercial Mortgage Servicer Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=600065

Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=804261
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Fitch Ratings
Primary Analyst:
Natasha Hanson, +1-212-908-0272
Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst:
Susan Hosterman, +1-212-908-0670
Director
or
Committee Chairperson:
Lauren Cerda, +1-312-606-2317
Senior Director
or
Media Relations:
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com


© Business Wire 2013
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