Fitch Updates Home Loan Services' RMBS Servicer Ratings; Watch Evolving

Business Wire, Sept 26, 2008

NEW YORK -- Fitch Ratings has updated Home Loan Services' (HLS) U.S. residential servicer ratings. The ratings remain as stated below and are placed on Rating Watch Evolving:

--Primary servicer for subprime product 'RPS2';

--Primary servicer for Alt-A product 'RPS2';

--Special servicer 'RSS2-'.

Fitch's recently completed operational review confirmed that HLS' mortgage servicing operations continue to perform at a level consistent with the prior year. The ratings reflect HLS' experienced management team, continued investment in enhancing its technology, and focused loan administration and default management practices. The special servicer rating is also based on the HLS' experience in managing asset liquidations and real estate owned (REO) assets. The rating actions also reflect the financial condition of HLS' parent, Merrill Lynch Bank & Trust Co., FSB, an indirect wholly owned subsidiary of Merrill Lynch and Company (Merrill Lynch), both of which are rated 'A ' and are on Rating Watch Evolving by Fitch.

On Sept.15, 2008, Bank of America announced that it had agreed to acquire Merrill Lynch in a $50 billion all stock transaction that is expected to close in the first-quarter of 2009. The Rating Watch Evolving reflects the uncertainty of market conditions and the sale of HLS' parent, Merrill Lynch. The rating watch indicates that further rating actions are possible depending upon the outcome of the acquisition and the financial condition of Merrill Lynch.

Headquartered in Pittsburgh, PA with a call center located in nearby Upper St. Clair, HLS services subprime, Alt-A, and second lien loans. As of June 30, 2008, HLS serviced 292,667 loans with an unpaid principal balance (UPB) of more than $43 billion, down from 338,529 loans with a UPB of $49.4 billion at year end 2007 due in part to the shutdown of the First Franklin origination platform in March 2008. The portfolio consists of $7.2 million Alt-A and $36.1 billion subprime product.

HLS does not special service for third parties, however the special servicer rating is based on the company's ability to service and liquidate defaulted loans. Since the prior year's review, HLS continued to improve its processes and controls across the servicing platform through enhancements to technology, significant staff additions to key areas such as loss mitigation, collections, foreclosure and REO, and proactive loss mitigation strategies and workflow process improvements. During the year, HLS completed the implementation of workforce and optimizer management technology in the call center realizing improved right party contacts and account penetrations.

Fitch has reviewed the HLS' servicing operations and believes that HLS has the infrastructure, technology and staff to support its current servicing portfolio. Fitch will continue to monitor HLS' ability to maintain its operational performance as its newly hired staff gains tenure and as the company navigates through the announced sale of Merrill Lynch.

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 Mortgage Servicers', dated Nov. 29, 2006, which is available on the Fitch Ratings web site at www.fitchratings.com.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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.