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TBW Bondholders to Miss Third Payout: Moody's

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Wells Fargo Bank completed the transfer of Taylor, Bean and Whitaker’s servicing rights to American Home Mortgage Servicing, according to Moody’s Investors Service. However, complication in servicing arrangements have meant bondholders are not receiving their monthly payment for the third month in a row. In August, the Federal Housing Administration (FHA) suspended TBW from originating and underwriting new FHA-insured mortgages. After TBW filed for Chapter 11 bankruptcy, Moody’s downgraded its rating of six residential mortgage-backed securities (RMBS). “The ordeal of the six RMBS transactions that were solely serviced by Taylor Bean and Whitaker (TBW) underscores that the only thing predictable about servicing transfer, and its impact on pool performance, is its uncertainty,” said Sally Acevedo, a Moody’s analyst. In another sign of uncertainty, bondholders will miss their third monthly payment on Monday, according to Acevedo. Some of these bonds, on review for possible downgrade, bear high credit support – as much as 80% in some cases. The servicing transfer took two months after multiple court proceedings, and it only happened after Wells and TBW struck a deal behind the scenes, which the court acknowledged. American Home Mortgage Servicing could start servicing the loans this week, Acevedo said. “Transferring servicing to a stable platform should eventually prove a positive for the RMBS pool’s performance. We say ‘eventually,’ because regulators froze the transaction accounts held at the failed Colonial Bank in mid-August,” Acevedo said. “Their resolution remains a work in progress.” When regulators froze the accounts, borrowers’ checks never deposited and electronic payments failed. American Home Mortgage Servicing will face many reconciliation challenges when servicing the TBW deals, Acevedo said. “Only after reconciliation can the impact of freezing the accounts and delaying the transfer of servicing on pool performance be determined,” Acevedo said. Write to Jon Prior.

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