Fitch Affirms Bank of America's U.S. RMBS Servicer Ratings

NEW YORK--()--Fitch Ratings has affirmed Bank of America, N.A.'s (BANA) U.S. residential mortgage servicer ratings as follows:

--Primary servicer rating for Prime product at 'RPS2-'; Outlook Negative;

--Primary servicer rating for Alt-A product at 'RPS2-'; Outlook Negative;

--Primary servicer rating for HELOC product at 'RPS2-'; Outlook Negative;

--Primary servicer rating for Subprime product at 'RPS2-'; Outlook Negative;

--Primary servicer rating for Second Lien product at 'RPS2-'; Outlook Negative;

--Special servicer rating at 'RSS2-'; Outlook Negative.

The rating actions reflect BANA's continued investment in mortgage servicing technology, improvements in collection call metrics, and the company's financial condition. BANA is rated 'A' with a Stable Outlook by Fitch. A company's financial condition is a component of Fitch's servicer rating analysis. The rating actions also take into account management and organizational changes announced since Fitch's prior review.

The rating actions and the Outlook Negative in particular incorporate the company's continuing obligation to comply with all requirements of the Consent Orders entered into by BANA with the Office of the Comptroller of the Currency, and by its parent, Bank of America Corporation (BAC), with the Board of Governors of the Federal Reserve System, in April 2011. The rating actions are also impacted by the company's status on meeting requirements of the National Mortgage Settlement that BAC and certain affiliates entered into with the United States of America et al in April 2012. In addition, the rating actions incorporate instances of material non-compliance contained in the company's Regulation AB report for the year ended Dec. 31, 2012, including several repeat findings.

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.

As of May 31, 2013, BANA's mortgage servicing portfolio was comprised of 7,970,274 loans totaling $1.1 trillion. Non-agency loans, as percentages of the total servicing portfolio, included 7.3% first lien prime product, 0.8% first lien Alt-A product, 3.5% first lien subprime product, 1.8% HELOC product, and 1.9% closed-end second lien product based on loan count. BANA's special servicing portfolio was comprised of 7,912 loans totaling $403.1 million. Since Fitch's prior review, BANA accelerated its sales of mortgage servicing rights (MSRs) including, but not limited to, high risk and defaulted loans, and is in the process of downsizing its servicing operations as its mortgage servicing portfolio decreases. In January 2013, BANA announced that it plans to sell MSRs on approximately 1.3 million residential loans totaling $215 billion, with loan transfers expected to occur in multiple stages through the end of the third quarter.

BANA continues to invest in technology to support its mortgage servicing operations. New ancillary systems implemented since the prior review include a new breach system (enabling flexible rules management and integration with document generation vendor), a new business process management platform (to better manage and automate some operational processes across the servicing operations), and a new case assignment engine (to enable the timely assignment of a single point of contact for defaulted borrowers). BANA also improved its average hold time and abandonment rate for inbound collections calls during the current review period.

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:

--'Global Rating Criteria for Structured Finance Servicers' (Aug. 13, 2010);

--'U.S. Residential and Small Balance Commercial Mortgage Servicer Rating' (Jan. 31, 2011).

Applicable Criteria and Related Research:

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=796167

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Contacts

Fitch Ratings
Primary Analyst
Thomas Crowe, +1-212-908-0227
Senior Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Diane Pendley, +1-212-908-0777
Managing Director
or
Committee Chairperson
Rui Pereira, +1-212-908-0766
Managing Director
or
Media Relations
Sandro Scenga, +1-212-908-0278 (New York)
sandro.scenga@fitchratings.com

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Contacts

Fitch Ratings
Primary Analyst
Thomas Crowe, +1-212-908-0227
Senior Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Diane Pendley, +1-212-908-0777
Managing Director
or
Committee Chairperson
Rui Pereira, +1-212-908-0766
Managing Director
or
Media Relations
Sandro Scenga, +1-212-908-0278 (New York)
sandro.scenga@fitchratings.com