Moody's Investors Service
said mortgage ownership in trust shouldn't be an issue within the residential mortgage-backed securities space as delayed foreclosures become more of a risk for the housing market.
As debate rages regarding the impact of the foreclosure moratoria
and the processing of paperwork at foreclosure
, Moody's analysts said "some have gone so far as to suggest that the RMBS trusts did not own the loans at closing and thus may not have any rights as a matter of law."
"We believe that these allegations that RMBS trusts do not own their mortgages are unfounded," Moody's said in its October ResiLandscape outlook.
Analysts said there will be some instances where a foreclosure is delayed due to faulty documentation, but it isn't clear how to fix the problem and ultimately the issue will be decided by the courts in many states. Moody's estimates about 27% of homes in foreclosure are being affected by the suspensions. Bank of America (BAC)
plans to restart its foreclosure proceedings
And now some financial institutions are changing procedures to require lenders insure mortgage paperwork is accurate
, according to Bloomberg.
Analysts also continue to expect housing prices to reach a bottom in the third quarter of 2011, as the foreclosure moratoria may help prices in the near term and then decline more than anticipated next year, as the mess gets cleaned up.
"Questionable processing practices are delaying and potentially reversing foreclosures and fast developing into a risk for the housing market," the analysts said. "The scope of the situation both in terms of the number of loans involved and the length of time it will take to resolve the problem is uncertain."
In a separate release, Moody's said commercial real estate markets are improving and "the future appears to brighten with each passing quarter."
Analysts said all seven commercial property types saw improved scores during the third quarter in the agency's Red-Yellow-Green rating platform, indicating better market conditions. Only the multi-family sector saw a decrease in its supply-demand relationship, according to Moody's.
Write to Jason Philyaw