Fitch Assigns Initial RMBS Servicer Rating to HomeStreet Bank

Fitch Ratings has assigned the following U.S. residential mortgage servicer ratings to HomeStreet Bank (HSB):

--Initial U.S. residential primary servicer rating for Prime product 'RPS3-'; Outlook Stable.

The rating action is based on HSB's established servicing practices and comprehensive internal control environment. However, the rating action also reflects the limited use of servicing technology and the relatively low volume of REO assets that the company historically has handled. In addition, the rating incorporates the financial condition of HSB, a non-publicly rated entity.

Finally, the rating also incorporates 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, mandated by regulators and other parties.

HSB is a wholly owned subsidiary of HomeStreet, Inc. (HomeStreet). HomeStreet is a diversified financial services company headquartered in Seattle, WA that has been in operation including various predecessor entities for over 90 years. HSB is a Washington state-chartered savings bank that provides residential and commercial loans, deposit products and services, non-deposit investment products, and cash management services. HSB's primary loan products include single family residential mortgage loans, commercial real estate mortgage loans, residential and commercial real estate construction loans, and commercial business loans. HSB's residential servicing operation is located in Seattle and had 63 full time equivalent (FTE) servicing positions at the time of Fitch's review. The company's lending operations and servicing portfolio are concentrated in the Pacific Northwest and Hawaii.

As of Dec. 31, 2013, HSB was servicing over 64,000 loans totaling $13.14 billion, including more than 9,000 non-agency prime loans totaling $1.67 billion.

While the company has an extensive operating history, it has within the past 24 months greatly increased its residential mortgage origination capacity by hiring over 380 mortgage lending and support personnel and adding 15 lending offices. At the time of Fitch's review, HSB was in the process of expanding and upgrading its residential servicing operation to accommodate the increased production volume as it has been relying on an experienced staff that operates without a significant emphasis on technology due to its relatively small portfolio and local servicing footprint. The limited use of servicing technology constrains the scalability of the servicing operation. However, recent technology initiatives which include the implementation of a scripting tool, an interactive voice response unit, a consumer loan workstation and a system that facilitates mortgage payments through its branch network are expected to support the company's expansion of its servicing capabilities.

HSB has an established REO department that handles a relatively low volume of REO assets. Over 23% of the current portfolio was comprised of FNMA and FHLMC loans which limited the volume of REO properties that HSB managed during the review period.

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:

--'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

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=600065

Global Rating Criteria for Structured Finance CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=718027

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=813751

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