Fitch Affirms Residential Credit Solutions, Inc. U.S. RMBS Servicer Ratings; Assigns Stable Outlook

NEW YORK--(BUSINESS WIRE)--

Fitch Ratings has affirmed the U.S. residential primary servicer ratings for Residential Credit Solutions, Inc. (RCS), including assigning a Stable Outlook:

--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 reflect RCS's high-touch servicing model; continued improvement in metrics for customer service and collections departments; effective default capabilities to establish contact with borrowers resulting in effective delinquency roll rates and resolution of defaulted loans; and the company's improving internal controls to keep pace with the current servicing environment.

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. In addition, the ratings reflect changes Fitch made to weights on various servicer metrics and categories used in its analytical process which were instituted for all forward mortgage servicers in 2011.

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 which are likely to be mandated by regulators and other parties.

RCS operates its servicing platform from Fort Worth, TX with a servicing staff of 175 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, 2012, RCS's servicing portfolio consisted of more than 39,000 loans totaling $6.5 billion. The current portfolio contains approximately 16,000 subprime first and second lien mortgage loans totaling approximately $3 billion, with 80% of RCS's portfolio under special servicing arrangements.

The U.S. Residential Mortgage Servicer ratings sector remains on Negative Outlook. On Nov 4, 2010, Fitch assigned a Negative Outlook for the entire U.S. Residential Mortgage Servicer ratings sector on increased concerns surrounding alleged procedural defects in the judicial foreclosure process.

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' . 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 and Related Research:

--'Global Rating Criteria for Structured Finance Servicers' (Aug. 16, 2010);

--'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 Servicers

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547305

U.S. Residential and Small Balance Commercial Mortgage Servicer Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=600065

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