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Bank of America finds buyer for Countrywide subprime MSRs

RMBS ratings unaffected

Bank of America (BAC) is set to break the logjam of legacy mortgage servicing rights transfers when it transfers the MSRs of 2,291 subprime loans that were originated by Countrywide Financial to Select Portfolio Servicing in November.

The legacy MSR market has been frozen by the New York Department of Financial Services, after the NYDFS, led by Superintendent Benjamin Lawsky, put a $2.7 billion MSR deal between Ocwen and Wells Fargo (WFC) on an indefinite hold.

Last week, at ABS East, a massive conference on the securitization and secondary market in Miami, one panelist said that the MSRs on the loans that make up the pre-crash residential mortgage-backed securitizations are “at a standstill,” without an end in sight.

“We’re at a standstill until we get Mr. Lawsky out of the way in New York,” Michael Lau, CEO of Pingora Asset Management, said during a panel titled “Legacy RMBS: Risk Mitigation and Servicing Update.”

Now, it looks as though Bank of America is ready to push past Lawsky’s supposed freeze with a transfer of legacy MSRs to Select Portfolio Servicing, according to a note from Moody’s Investors Service.

Moody’s note stated that it was asked by Bank of America to review the ratings of three RMBS transactions to see if the servicing transfer would result in the downgrade or withdrawal of the RMBS’ ratings by Moody’s.

Moody’s stated that the servicing transfer, which is scheduled for November 1, “will not, in and of itself and at this time, result in a reduction or withdrawal of the current ratings on the securities issued by these transactions.”

The affected RMBS transactions are: CWABS Asset-Backed Certificates Trust 2005-10, CWABS Asset-Backed Certificates Trust 2006-4, and CWABS Asset-Backed Certificates Trust 2006-1, which were originated to Countrywide and transferred to Bank of America when it acquired the now-defunct company.

“Moody's view is based primarily on its opinion that the ratings of each of the securities in the transactions will not have material negative implication following changes in servicing strategy that occur after transfer of servicing rights,” Moody’s said.

“Moody's opinion addresses only the current impact on Moody's ratings, and we do not express an opinion as to whether the transfer of servicing rights has or could have any other effects that investors may or may not view positively.”

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