Long judicial foreclosure timelines challenge investors

The longer the timeline, the greater the risk

Investors in residential mortgage-backed securities will see increased carrying costs in the near future as servicers experience longer foreclosure timelines in key judicial foreclosure states, Moody’s (MCO) alleges in its latest Servicer Dashboard report.

It’s no secret that judicial foreclosure states like New York and  New Jersey are facing longer foreclosure timelines and a backlog of properties that still need to be moved through the system.

The impact of this is not lost on RMBS investors, and it doesn’t appear to be subsiding as fast as investors would like it to.

"Timelines for pending foreclosure inventory remain significantly longer than those for completed foreclosures, which means foreclosure timelines will continue to increase," said Bill Fricke, a Moody’s senior vice president. "Some servicers, however, have brought down the average age of the loans in their pending foreclosure inventory, meaning that the rate of increase in foreclosure timelines should start to slow."

But on a servicer-by-servicer basis, Moody’s says GMAC was the only servicer with a current-to-worse roll rate in the first quarter for all loan product times. The ratings firm put the blame on “conflicting priorities,” including the transfer of GSE loans to Walter Management Corp (WAC). Not to mention, the ongoing integration of staff and systems at Ocwen (OCN) and overall uncertainty about operations, Moody’s claims.

As of today, New York, New Jersey and Florida remain overwhelmed by the sheer volume of foreclosure cases pending.

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