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Rating Action - Servicer:

MOODY'S AFFIRMS HOMECOMINGS' RATINGS OF SQ1 AS PRIMARY SERVICER OF PRIME RESIDENTIAL MORTGAGES AND ASSIGNS AN SQ2+ RATING AS A SUBPRIME AND SPECIAL SERVICER

16 May 2006
MOODY'S AFFIRMS HOMECOMINGS' RATINGS OF SQ1 AS PRIMARY SERVICER OF PRIME RESIDENTIAL MORTGAGES AND ASSIGNS AN SQ2+ RATING AS A SUBPRIME AND SPECIAL SERVICER

US RESIDENTIAL MORTGAGE SERVICER RATING ACTIONS

New York, May 16, 2006 -- Moody's Investors Service has affirmed Homecomings Financial Network, Inc.'s ("Homecomings") SQ1 ratings, Moody's highest rating, as a primary servicer of prime, HLTV, and second lien residential mortgage loans and assigned Homecomings an SQ2+ rating as a primary servicer of subprime residential mortgage loans and as a special servicer. Moody's ratings are based on Homecomings' strong collection abilities for prime, HLTV, and second lien loans, above average collection abilities for subprime loans, strong loss mitigation results for prime, HLTV, second lien, and subprime loans, above average foreclosure and REO timeline management for prime loans, strong foreclosure and REO timeline management for subprime loans, and above average servicing stability.

Homecomings performs primary and special servicing for its parent GMAC-RFC, which is engaged in purchasing and securitizing residential mortgage loans. Homecomings' servicing portfolio totaled approximately $112.6 billion as of March 31, 2006. The portfolio includes prime, Alt-A, subprime, second lien, and HLTV loans. Homecomings operates three servicing centers in Dallas, Texas; San Diego, California; and Blue Bell, Pennsylvania.

The ultimate holding companies of GMAC-RFC are Residential Capital Corporation ("ResCap"), General Motors Acceptance Corporation ("GMAC"), and General Motors Corporation ("GM"). ResCap, GMAC, and GM are rated Baa3, Ba1, and B3 for senior unsecured debt, respectively, - all of which are currently under review for possible downgrade. Following GM's announcement that it has entered into an agreement to sell a 51% stake in GMAC to a consortium led by Cerberus, a private equity and hedge fund management firm, Moody's Investors Service announced on April 3, 2006 that it is maintaining its review for possible downgrade of GMAC's Ba1 long-term rating and ResCap's Baa3 long-term and Prime-3 short-term ratings. The transaction is currently targeted to close in the fourth quarter of this year. Moody's review of ResCap's ratings continues to focus on any further accounting or control issues, the company's continued efforts to extinguish its inter-company debt with GMAC, and the final closing of GM's sale of GMAC to a group led by Cerberus.

Moody's also stated that, assuming the sale of GMAC closes as planned, key credit drivers for ResCap's rating will include 1) ResCap's efforts to strengthen its accounting and other operational and financial controls, and the control culture in which those policies are applied, 2) ResCap's evolving strategic direction, focusing on the relative speed and development of its various business lines and its international expansion, 3) further integration of the company's business lines, which until recently have been operating autonomously, and 4) ResCap's evolving financing structure, with a focus on the company's capital structure, leverage and liquidity risk.

Furthermore, Moody's stated that even if the sale of GMAC does not close, it would most likely maintain the current Baa3 and Prime-3 ratings of ResCap. This rating action would reflect Moody's expectation that ResCap would likely be sold on its own if the GMAC sale efforts are abandoned. (see press releases dated April 3, 2006 and March 16, 2006 for further information).

ResCap's senior unsecured rating has a significant impact on Homecomings' servicing stability assessment. A downgrade in ResCap's senior unsecured rating could result in a reduction in the company's servicing stability assessment and increase the likelihood of negative actions on its servicer quality ratings. The most likely downside scenario would be an SQ1- rating for the prime, HTLV and second lien servicer ratings from SQ1, an SQ2 rating for the subprime servicer rating from SQ2+, with the special servicer rating remaining at SQ2+.

The servicing stability assessment also applies to the master servicer, GMAC-RFC. A downgrade in ResCap's senior unsecured rating could result in a downgrade in the servicing stability assessment of GMAC-RFC and increase the likelihood of a negative action on GMAC-RFC's master servicer quality rating. The most likely downside scenario would be an SQ1- master servicer rating from SQ1.

Moody's SQ ratings represent its view of a servicer's ability to prevent or mitigate asset pool losses across changing markets. The rating scale ranges from SQ1 (strong) to SQ5 (weak). Where appropriate, a "+" or "-" modifier will be appended to the relevant rating to indicate a servicer's relative servicing quality within a particular category. Moody's servicer ratings are differentiated in the marketplace by focusing on performance measurement. SQ ratings for U.S. residential mortgage servicers incorporate assessments of delinquency transition rates, foreclosure timeline management, loan cure rates, recoveries, loan resolution outcomes, and REO management - all critical indicators of a servicer's ability to maximize returns from mortgage portfolios.

Moody's servicer ratings also consider the company's ability to maintain its focus on high quality servicing in an economic downturn. Servicing operations can be stressed by increasing the number of delinquent loans while at the same time increasing the need for liquidity. The SQ rating reflects our expectation of the impact that the servicing will have on the on-going credit performance of the portfolio. For this reason, Moody's monitors SQ ratings based on periodic information provided by servicers and conducts a formal re-evaluation of its servicer ratings annually.

New York
Warren Kornfeld
Managing Director
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Fei Fern Wang
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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