Given the challenging structured finance market conditions and an uncertain economic outlook, mortgage servicing is in hot demand, especially among investors looking for loss mitigation in distressed mortgage assets.

Last week, Tony Renzi, chief operating officer for Residential Capital, took the time to answer a few questions regarding the firm's announcement that it would expand its mortgage special operations platform to meet this growing demand.

Renzi is responsible for managing all ResCap operations including lending, servicing and special operations. Most recently, he served as chief operating officer of enterprise operations for ResCap's residential finance group. Renzi has been with GMAC and ResCap for 22 years, holding numerous senior leadership positions in servicing, operations and lending.

ASR: How will ResCap be expanding its mortgage special operations business to meet the growing demand for mortgage servicing and loss mitigation in loan portfolios? What steps are you taking to complete this expansion?

Renzi: ResCap is an industry leader in mortgage servicing, both in our support model and our loan servicing technology. We service a multitude of loan products and credits for our own loan portfolio and those of investors and other third-party clients.

We constantly assess market conditions to quickly respond to changes in servicing needs. Distressed asset pools are growing and we've noted an increased demand for our servicing skills by third parties, especially institutional customers.

To meet the demands of hedge funds, mortgage bankers and other institutional investors, we are expanding our "special operations" servicing offering in several ways. We made a key management hire with the appointment of John Vella to lead the special operations team. John is an industry veteran with more than 20 years of mortgage experience and expertise in distressed asset mitigation. We're expanding and refining our "service cell" support model for the institutional customer population. We're analyzing the specific servicing requirements of institutional investors against our existing servicing technology, with an eye on strategically enhancing our functionality, especially in the area of loss mitigation. And, as always, we continually look for ways to refine the client-facing servicing experience and make handoffs among the service team in the back office more streamlined.

ASR: Will ResCap be changing its mortgage servicing strategies or loss mitigation efforts at all?

Renzi: Special operations uses the same support concepts as our industry-leading servicing group. Building out special operations will consist of enhancing and refining our existing tool kit to service the institutional population and their associated high-risk, complex asset portfolios.

Our core servicing offering comprises a variety of loss mitigation capabilities, including the use of a very successful operational concept called "servicing cells." A servicing cell is a dedicated loan servicing and loss mitigation team focused exclusively on a specific portfolio, investor or client. Members of servicing cells are armed with client-specific knowledge as well as a servicing tool kit that consists of servicing and loss-mitigation technology to proactively identify troubled loans.

Servicing cells use our intelligent servicing platform to analyze loans and loan portfolios and provide options for quick remediation that will endure as long-term solutions as well. Part of expanding special operations will include further training our servicing cell members to better understand the unique requirements of the institutional investor and how their loan portfolios differ in complexity and structure from other types of servicing customers.

ASR: It seems everyone has their own unique perspective on how to service mortgages. What are some of your mortgage servicing strategies and loss mitigation techniques?

Renzi: Our focus is on early intervention. The faster we can identify a challenging situation for a customer, the more quickly we can craft and implement a solution to help them. We also want to ensure that the loss mitigation solutions we implement are long lasting, so we take time to understand all the dimensions of a customer's unique situation and construct customized workout solutions to address each individual circumstance.

In 2002, ResCap launched its key chain alliance team, which consists of loss-mitigation counselors who live and work in neighborhoods across the country where homeowners are experiencing financial challenges. Key chain alliance personnel meet with our customers face-to-face and implement immediate, long-lasting loss mitigation solutions. We currently operate in 19 cities across the country and also have a "mobile" key chain alliance that is deployed where needed across the country. We are committed to an ongoing investment in these capabilities as we manage through increasingly dynamic economic times.

ASR: How many new hires do you expect to bring on to the special operations team? You mention an expansion of the support team as part of your enhancements.

Renzi: At this stage in our servicing enhancement, ResCap is evaluating the unique requirements of our institutional customers to determine the optimal number of resources to add to special operations.

Special operations operates primarily from our existing servicing centers in Dallas and Fort Washington, Pa.

ASR: Specifically, where are you seeing the most demand for your services?

Renzi: We see incremental servicing opportunities in supporting hedge funds, investment bankers, mortgage bankers and any financial institution with troubled assets in need of supplementing or replacing their loss-mitigation capabilities.

ASR: What type of servicing do you provide? Can you define what subservicing is?

Renzi: ResCap offers both servicing and loss mitigation for high-risk, complex portfolios. Servicing entails such administrative functions as collecting mortgage payments; assigning payments to principal, interest and escrow accounts; sending out billing and reminders; and providing assigned account representatives to support our customers.

Loss mitigation involves management of past-due collection activities, refinancing activities, loan workouts, and, in some cases, management of foreclosures.

Subservicing is defined as crafting a servicing administration program from new loan boarding through real estate owned (REO) for a third party client. The client owns the portfolio economics and pays the subservicer a fee for the servicing program. The fees can be aligned with activity or expressed in basis points against the notional balance of the portfolio being serviced.

We call our servicing platform a "debt servicing utility" (DSU). This platform is capable of supporting any loan product, brand or servicing requirement. Today, we support first and second mortgage loans, home equity lines of credit (HELOCs) that have credit card access, unsecured installment loans - all credit grades - and we have the ability to service a variety of consumer loans including auto loan servicing.

ASR: Are there new players in the market that may need your services as well? For example, distressed opportunities funds?

Renzi: Yes, we believe the market will drive new entrants and we want to position ourselves to offer help to these organizations that require industry-leading special servicing capabilities.

ASR: Why now? Why did you decide this was the right time to expand this particular platform?

Renzi: ResCap is an industry-leader in mortgage servicing, both in our technology and in our support model. With the increasing number of loan defaults industrywide, and our keen interest in preserving homeownership across the country, we want to keep evolving our servicing offerings to meet the needs of an ever-broader customer base. ResCap continually enhances our servicing capabilities to support the requirements of our own loan portfolios. A natural extension of our business model is to offer this incremental expertise to homeowners and institutional investors through our servicing and special operations groups.

(c) 2008 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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