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Servicing / The Ticker

RMBS investors battle foreclosure timelines as REO sales pick up

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Investors in residential mortgage-backed securities continue to battle headwinds on the servicing side of the market, with Moody’s data still showing long default timelines in key judicial foreclosure states even as REO timelines pick up.

Moody’s says the judicial foreclosure states of New York, New Jersey and Florida remain "overwhelmed by the sheer number of cases to be processed."

Yet, REO sale timelines picked up in the third quarter of 2012, a reflection of the recovering housing market, Moody’s said in its latest Servicer Dashbord publication. 

The dashboard shows current-to-worse roll rates getting better in the fourth quarter of 2012, with both subprime and Alt-A products improving.

Collections on loans also improved as the economy picked up, making loan modifications more successful long-term.

 On the other hand, total cure and cash-flow performance rates were mixed in 4Q, Moody’s said.

"Citi’s performance in Alt-A continued to decline, driven by a reduction in modification volume. Chase’s Jumbo and Alt-A performance decreased slightly as the servicer exhausted its eligible loan population for loss mitigation," the dashboard said. "Bank of America’s numbers improved due to transfers of non-performing loans to special servicers as well as compliance with last year’s state attorneys general settlement performance goals."

The number of loans that ended up re-defaulting or going through a repeat modification also fell in the fourth quarter.

"This indicates that previously done modifications are taking hold and performing better than modifications done in the past," said Moody’s. "Helping in this trend has been the implementation by servicers of single-point-of -contact procedures in loss mitigation and a trend of more principal forgiveness modifications."

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