Fitch Ratings: Pressures Mount for U.S. RMBS Servicers.

NEW YORK -- Continued increases in defaulted subprime loans remain the key driver behind many of the challenges that U.S. RMBS servicers face, according to participants who attended Fitch Ratings' inaugural RMBS Servicing Workshop, which took place in New Orleans last month.

With higher defaults from the large volume of upcoming ARM resets likely, servicers are more hard-pressed to find and develop more proactive loss mitigation solutions. Making the task more difficult is the increased difficulty that servicers are having in contacting borrowers. Servicers expressed concerns that borrowers are becoming less cooperative and are going to foreclosure in increasingly higher numbers without speaking with the servicer. Ultimately, servicers agreed that developing overall proactive default strategies, contacting borrowers early and often, and in the case of imminent default, offering modifications that are in compliance with pooling and servicing agreements, were practical responses to increasing defaults.

Servicers were also concerned with the complex regulatory oversight and compliance, increasing cost of servicing, proactive loss mitigation, including modifications, increased default expectations, growing investor reporting requirements, Reg AB reporting and the pros and cons of outsourcing.

More than 70 servicing executives representing over 60% of all Fitch-rated U.S. RMBS servicers attended last month's workshop. The report, 'U.S. RMBS Servicer Workshop', is available on the Fitch Ratings web site at www.fitchratings.com.

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