NEW YORK--(BUSINESS WIRE)-- Fitch Ratings affirms SunTrust Mortgage, Inc.'s (STM) U.S. residential primary servicer rating for prime product at 'RPS2'. The rating is based on the company's changes in senior management, staffing and training, and the financial support provided to the servicer from its parent SunTrust Banks, Inc., (SunTrust) which is rated 'BBB+/F2' with rating Outlook Positive by Fitch. The rating also reflects material changes the servicer has made to its default servicing platform which addressed procedural and foreclosure process deficiencies. In addition, the rating 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.

STM is a wholly owned subsidiary of SunTrust with its principal offices located in Atlanta, GA. SunTrust is ranked among the top 10 largest commercial banks, by asset size, in the U.S. with a footprint that includes the MidAtlantic and Southeastern states. STM servicing is headquartered in Richmond, VA, and services a full range of prime residential mortgages nationwide. As of June 30, 2011, the company serviced 930,110 residential mortgage loans totaling approximately $162.7 billion, which includes 63,355 prime loans totaling $25.1 billion.

In June 2011, Fitch downgraded the operational risk ratings of several residential mortgage servicers amid the growing burden of managing delinquent and defaulted mortgages in an environment of heightened regulatory scrutiny; the increased areas of risk identified by various regulatory bodies which ultimately resulted in consent decrees and, the slower than expected pace that institutions have demonstrated in responding to the foreclosure crisis and implementing process changes. STM's primary servicer rating for prime was downgraded at that time to 'RPS2' from 'RPS2+'.

STM, who is under Consent Decree with the Federal Reserve, has instituted and is still making ongoing changes to several processes and procedures to meet their regulatory and compliance requirements and has increased staffing and training in its default, quality control and compliance departments.

The servicer has also made several organizational changes. In February 2011, STM completed the transition of default administration to its risk management group. In March 2011, they completed several senior management changes including naming a new President and CEO, internal transfers, and the retirement of the EVP of mortgage and servicing operations, a position which has recently been filled. On Sept. 1, 2011, the servicer eliminated its offshore call center operations and transferred the functions to its in-house operations.

Fitch's review confirmed that STM is taking steps to develop its internal processes and procedures to be in compliance with the changing industry standards. However, Fitch will continue to monitor STM's ability to continue progress to this goal while maintaining its loan performance in a high delinquency environment.

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 U.S. Residential Mortgage Servicers', Nov. 29, 2006;

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

--'Rating U.S. Residential and Small Balance Commercial Mortgage Servicer Rating Criteria', dated 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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KEYWORDS:   United States  North America  New York

INDUSTRY KEYWORDS:   Professional Services  Banking  Finance

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