Deutsche Bank ranks servicers on speed of distressed mortgage liquidation
Carrington Mortgage Services liquidates distressed loans faster than any other subprime servicer, according to a report from Deutsche Bank. Analysts modeled liquidation speeds of servicers across four different loan categories using the Conditional Liquidation Rate since April 2010. The CLR is a model that includes the amount of liquidated loans divided by the aggregated balance of all outstanding mortgages in either 60-day delinquency or worse. That includes 90-day delinquency, foreclosure and REO. Record-high distressed housing inventory has attracted a lot of investor attention to servicers' loss-mitigation strategy. With the government's Home Affordable Modification Program and the Home Affordable Foreclosure Alternatives program reducing principal, interest and even short selling a home, investors are making adjustments based on the speeds these loans are worked out. "Servicer intervention is one of the biggest risk factors to housing and non-agency RMBS markets," according to the report. For subprime mortgages, Carrington is the fastest servicer to liquidate loans in the distressed pipeline. Homecomings Financial and HomEq, which was recently bought by Ocwen, made up the top-three. According to Deutsche, Carrington, which rents out its REO properties, has traditionally been the slowest to liquidate these loans. But as of August 2010, the REO rate at Carrington reached 21.9% compared to 3.9% for the rest of the top-20. "CMS' obligation under the provisions of the PSAs is to seek to maximize proceeds to the related Trusts. It makes asset-by-asset disposition decisions based on that principle," Chris Orlando, a spokesperson for Carrington told HousingWire. Wilshire Credit Corp. used to hold the fastest liquidation speeds, but it is slowest since April. The serious delinquency rate on the Wilshire portfolio has increased to 65% compared to 40.7% for the rest of the subprime servicers. This, according to Deutsche, could be because the recent merger of the Bank of America and Wilshire servicing platforms. For Alt-A servicers, EverHome Mortgage Company, PNC Mortgage and SunTrust Mortgage had the top-fastest liquidation rates. Of Option-ARM servicers, Litton Loan Servicing, GMAC Mortgage, and Central Mortgage were ranked in the top-three. And for Jumbo mortgages, ABN AMRO Mortgage Group, IndyMac Mortgage Services and PNC were the fastest. BofA and its acquired Countrywide operation were among slowest in each category. GMAC, since branded as Ally Financial might see a sharp change in liquidation rates in the near future with its recent foreclosure process review. "In the current mortgage market with high delinquency and slow liquidation rates, bond investors are increasingly exposed to the risk that servicers may implement loss mitigation programs that will serve their own interest or the interest of residual investors," according to Deutsche analysts. Deutsche added that liquidation rates can be volatile and investors should monitor these speeds because of the impact on their own portfolios. Write to Jon Prior.