Monday Morning Cup of Coffee: Is housing strong enough to weather rate hikes?

Monday Morning Cup of Coffee: Is housing strong enough to weather rate hikes?

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New American Home Mortgage servicer deal falls short of Fitch 'triple-A' criteria 

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Fitch Ratings said Friday a new American Home Mortgage "servicer advance receivable transaction" failed to meet triple-A ratings criteria due to increased concerns over the regulatory landscape and liquidity risks created by longer foreclosure time lines. Fitch specifically made that statement about American Home Mortgage "AHM SART 2011-1" transaction. American Home terminated the agreement with Fitch, the ratings agency said, after not getting the triple-A status. Fitch said it had a responsibility to publicized the development. According to Fitch Ratings, RMBS servicer advance receivable transactions "are comprised of a pool of receivables that loan servicers expect for advances made on delinquent loans. These usually include principle, interest, taxes, insurance, and property upkeep and maintenance." The American Home Mortgage SART deal possesses characteristics more inline with mid-investment grade ratings, Fitch said. Since December 2010, Fitch has used a more conservative methodology when dealing with servicer advance receivable transactions due to concerns over delayed foreclosures and an unpredictable regulatory landscape. After reviewing the AHM 2011-1 transaction, Fitch Ratings determined the advance rates on receivables were too high to qualify for triple-A ratings. In addition, the AHM deal only has a reserve fund to meet nine months of collections, which does not satisfy the qualifications for Triple-A status, according to Fitch Ratings. The failure to meet triple-A status on the SART transaction does not impact the positive news reported earlier in the week when Fitch Ratings assigned proficient and high performance ratings to various mortgage servicing segments operating under the umbrella of American Home Mortgage Servicing. Write to: Kerri Panchuk.

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