Fitch Updates Wachovia Bank's Resi Servicer Ratings; Remains on Rating Watch Evolving

2008-12-04 23:49:01 -

Fitch Ratings takes the following actions on Wachovia Bank, N.A.'s (Wachovia Bank) U.S. residential servicer ratings:
--The primary servicer rating for prime product updated at 'RPS2';
--The primary servicer rating for home equity/home equity line of credit (HE/HELOC) product updated at 'RPS2'.
The ratings also remain on Rating Watch Evolving.
Fitch's recently completed operational review confirmed that Wachovia Bank's mortgage servicing operations continue to perform at a level consistent with the prior year. The servicer rating actions are based on Wachovia Bank's consistent and experienced senior management team and established loan administration processes. The ratings also reflect Wachovia Bank's long-term issuer default rating (IDR) rated 'A+'; Rating Watch Positive by Fitch.
On Oct. 3, 2008, Wells Fargo & Company (Wells Fargo) and Wachovia Corporation (Wachovia) signed a definitive agreement for the merger of the two companies including all of Wachovia's banking operations. The servicer ratings remain on Rating Watch Evolving reflecting the continued uncertainty of market conditions and the impact of the pending acquisition of Wachovia Bank's servicing operations to Wells Fargo. The Rating Watch also indicates that further rating actions are possible depending upon the outcome of the acquisition.
Wachovia Bank's parent, Wachovia Corporation, is a diversified banking and financial services company headquartered in Charlotte, NC. Wachovia Bank has a strong retail banking presence with offices throughout the Eastern U.S. The company also has a nationwide investment/brokerage presence. Wachovia Bank has four business divisions: General Bank; Capital Management; Wealth Management and Corporate and Investment Banking. The Retail Credit Group is a division of Wachovia's General Bank, and is where Wachovia Bank's servicing operations are housed. As of March 31, 2008, the company serviced 1,278,475 loans with an unpaid principal balance (UPB) of approximately $62.7 billion, up slightly from 1,280,007 loans with a UPB of $60.9 billion at year-end 2007.
In response to increasing defaults in the company's mostly prime portfolio, Wachovia Bank has implemented additional loss mitigation procedures and tools. Further, to address increased activity in the collections area, Wachovia Bank off-shored its early stage collections beginning in February 2008. Fitch notes that other servicers have had mixed results with off-shoring customer facing functions and specifically collection activities.
Fitch will continue to monitor Wachovia Bank's ability to maintain its servicing and operational performance while expanding its default management functions under difficult market conditions and with the integration with Wells Fargo.
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.

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