Fitch Affirms Wells Fargo's Primary Resi Servicer Ratings

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NEW YORK--(BUSINESS WIRE)-- Fitch Ratings takes the following rating actions on the U.S. residential primary servicer ratings for Wells Fargo Home Equity Group, (WFHE) a division of Wells Fargo Bank, N.A.:

--U.S. Residential Primary servicer rating for Home Equity Line of Credit (HELOC) affirmed at 'RPS2+';

--U.S. Residential Primary specialty servicer rating for second lien product affirmed at 'RPS2+'.

WFHE is under Consent Decrees with the Office of the Comptroller of the Currency (OCC), under which the OCC made certain findings in connection with the servicer's foreclosure practices, which the bank neither admitted nor denied. The servicer 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 rating actions are based on an updated full review conducted after WFHE's primary servicer ratings were downgraded in June 2011 to 'RPS2+' from 'RPS1-'. The review focused on the internal procedural and foreclosure process deficiencies that the servicer addressed and the material changes that the servicer began implementing to its default management platform.

The servicer completed the consolidation of the Wachovia and Wells merger that began in 2009 and is now operating on one servicing platform. The ratings also reflect the ongoing organizational and senior management changes, increased quality assurance testing and additional oversight and monitoring functionalities through the company's home equity and operational risk (HECOR) team in identifying potential issues.

In addition, the ratings reflect the financial strength of its ultimate parent; Wells Fargo & Company (WFC) rated 'AA-', Stable Outlook by Fitch. Further, the rating reflects Fitch's overall continued 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.

WFHE is headquartered in San Francisco, CA and is a servicer of HELOC and second lien fixed-rate products. As of June 30, 2011 WFHE serviced approximately 2.12 million loans totaling $117.9 billion, which is further broken down by products with 1.51 million home equity line of credit (HELOC) loans totaling $86.2 billion and 504,657 second lien products totaling $44.2 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. WFHE's primary servicer ratings was among those downgraded.

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

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:

--'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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