TEXT-Fitch affirms Citimortgage residential servicer ratings

Thu Dec 20, 2012 6:00pm EST

Dec 20 - Fitch Ratings has taken the following rating actions on the U.S.
residential servicer ratings for CitiMortgage, Inc. (CMI):

--Residential primary servicer rating for prime product affirmed at 'RPS2+',
assigned Outlook Negative;
--Residential primary servicer rating for Alt-A product affirmed at 'RPS2+',
assigned Outlook Negative;
--Residential primary servicer rating for subprime product affirmed at 'RPS2+',
assigned Outlook Negative;
--Residential master servicer rating affirmed at 'RMS1', assigned Outlook
Negative.

The servicer rating actions reflect enhancements to CMI's control environment,
continued investment in technology to support its mortgage servicing operations,
and the company's financial condition. CMI's parent, CitiBank, NA (CBNA) is
rated 'A' with a Stable Outlook by Fitch. A company's financial condition is a
component of Fitch's servicer rating analysis.

The Negative Outlook is attributable to the company's continuing obligation to
comply with all requirements of the Consent Orders entered into by CBNA with the
Office of the Comptroller of the Currency, and by CBNA's parent, Citigroup,
Inc., with the Board of Governors of the Federal Reserve System, in April 2011.
The Negative Outlook also reflects the requirements of Consent Judgment that
CMI, CBNA, and Citigroup, Inc. entered into with the United States of America et
al in April 2012. In addition, the Negative Outlook incorporates one instance of
material non-compliance contained in the company's Regulation AB (Reg AB) report
for the year ended Dec. 31, 2011 as well as internal audit findings for the
current review period, which have been addressed by management. The master
servicing rating reflects CMI's solid platform and strong servicer oversight and
investor reporting capabilities.

Finally, the ratings reflect Fitch's overall concerns for the U.S. residential
servicing industry. These 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.

CMI's residential mortgage servicing activities take place over 11 domestic
sites; however, the majority of employees are located in the St. Louis, MO,
Tucson, AZ, and Dallas, TX sites. Since Fitch's last review, CMI's servicing
staff increased to 9,686 full-time equivalent (FTE) from 5,827 FTE. As of Aug.
31, 2012, CMI's portfolio consisted of over 3.2 million loans totaling $456
billion, a decrease from 3.5 million loans totaling $510.1 billion as of July
31, 2011. The portfolio included over 404,000 non-agency prime loans totaling
$96.5 billion, 63,500 Alt-A loans totaling $8.5 billion, and 81,300 subprime
loans totaling $7.6 billion. The master servicing portfolio consisted of over
83,000 loans totaling $18 billion.

CMI stated that the Reg AB report for its servicing operations is no longer
filed with the Securities and Exchange Commission because all related securities
had been de-listed under Rule 15g. Further, CMI's Reg AB report for the year
ended Dec. 31, 2011 was completed on a timely basis and delivered to the Trustee
for non-agency RMBS transactions.

Since Fitch's last review, CMI implemented an enhanced internal audit process
intended to perform a more comprehensive and holistic review of the servicing
operations. In connection with this increased focus on the servicing operations,
the internal audit department completed a full baseline risk assessment of all
servicing functions during 2012. CMI is also strengthening its control
environment with the implementation of its managers control assessment (MCA)
process. MCA is designed to be a diagnostic, self-assessment tool to help
business managers prevent or detect operational control problems, properly
address and mitigate emerging risks, and drive implementation of corrective
actions, and will replace the company's risk and control self-assessment
process. MCA is also intended to provide a more holistic assessment of the
effectiveness of internal controls, and to better align CMI's servicing
operations with industry 'best practices', and Consent Orders and
Sarbannes-Oxley requirements.

CMI continues to update and enhance its servicing technology. During the current
review period, the company completed projects to improve workflow, and automate
additional default functions and letter generation. CMI also enhanced its master
servicing investor website to increase transparency into loan level information.

Fitch believes that CMI continues to maintain a capable servicing operation with
the staff, procedures, controls, default management processes, and technology to
manage its current servicing portfolio. Fitch will continue to monitor the
company's ability to maintain performance as it pursues its servicing
initiatives in this high delinquency environment.

The Outlook for the U.S. Residential Mortgage Servicer ratings sector remains
Negative. On Nov. 4, 2010, Fitch assigned a Negative Outlook for the entire U.S.
Residential Mortgage Servicer ratings sector on increased concerns surrounding
alleged procedural defects in the judicial foreclosure process.

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 website at 'www.fitchratings.com'.

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:
--'Global Rating Criteria for Structured Finance Servicers' (Aug. 13, 2010);
--'U.S. Residential and Small Balance Commercial Mortgage Servicer Rating' (Jan.
31, 2011).

Applicable Criteria and Related Research:
U.S. Residential and Small Balance Commercial Mortgage Servicer Rating Criteria
Global Rating Criteria for Structured Finance Servicers
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