EMC Sees Subprime Servicer Ratings Dropped by Moody's
Moody's Investors Service said today that it has downgraded the servicer quality rating of EMC Mortgage Corporation as a primary servicer of subprime residential mortgage loans to "SQ1-" from "SQ1." Moody's also affirmed EMC's prime servicer rating of "SQ2," a rating of "SQ2" as a primary servicer of second lien residential mortgage loans and "SQ2+" as a special servicer.
From the press statement:
The rating action was prompted by the high level of volatility that has been experienced in the subprime market as well as a reduction from strong to above average in Moody's assessment of the company's foreclosure and REO timeline management. Moody's believes that the recent and continued deterioration in the subprime mortgage market as well as the slowdown in origination volume, could potentially impact servicer quality in the future.
The hit to foreclosure and REO timelines likely isn't unique just to EMC -- as the number of properties in foreclosure or REO status surges, the inevitable result is timeline creep. That's true for all servicers. In particular, on the foreclosure side, the amount of time it takes to authorize short sales is likely causing timelines to bloat as properties in foreclosure status await investor approval for any sales activity.
On the REO side, sales are problematic -- no different than on the retail side of the business. I can share a comment I recently heard from the head of one of the REO industry's largest shops: "A year ago, every REO agent was bitching that they didn't have enough listings; now they've got more listings then they ever hoped for and can't sell the damn things."
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