Moody's announced two servicer rating affirmations last week, covering both Taylor, Bean and Whitaker as well as First Horizon. Both primarily service prime and Alt-A residential mortgages. First Horizon Home Loan's saw its servicer ratings affirmed at SQ2+ as a Primary Servicer of prime loans and SQ2 as a Primary Servicer of second lien loans. From the press release:
As of May 31, 2007, First Horizon's servicing portfolio totaled 645,431 loans for an unpaid principal balance ("UPB") of approximately $105 billion. Prime and Alt-A first lien loans comprised approximately 92% of the overall portfolio on a UPB basis. First Horizon's second lien servicing portfolio totaled approximately $545 million as of May 31, 2007 ... Since the last review, First Horizon has introduced several new initiatives to its customer service operations. Enhancements include electronic bill notification for registered First Horizon web users and the implementation of 100% call recording, which may assist servicers in training new employees and resolving potential borrower disputes. Moody's believes that First Horizon can further enhance its level of customer service by having a separate call monitoring group to provide a more objective assessment of customer service performance.
Taylor, Bean and Whitaker was also affirmed, although at SQ3 as a Primary Servicer of prime loans, and Moody's was clearly less positive towards the company in its press statement:
While the company's loss mitigation performance did indicate an improvement since the prior review, Moody's would positively view efforts to enhance the level of technology implementation and execution. Further efficiencies could be obtained through postal service planet code technology as well as a comprehensive loss mitigation application. Moody's assesses the company's foreclosure and REO timeline management as average. While the period from foreclosure referral to foreclosure sale was consistent with the prior review, the company experienced deterioration in its timeline from REO acquisition to liquidation metrics. TBW's REO liquidation process is handled by REO Specialists, LLC, a captive subsidiary based in Ocala, Florida.
Beyond the revelation that TBW isn't using a "comprehensive" loss mitigation platform, there's nothing like having your own REO management company publicly called out by a rating agency for its lack of performance. I've heard from many contacts who run their own REO shops that many in-house REO departments (like TBW's, which really is 'in-house' but also takes in third party work) are just plain overwhelmed by the recent surge in volume. Many apparently are having trouble getting enough qualified asset managers on staff, and others are looking to quickly set up with outsourcing partners to handle overflow -- a process that takes time to set up properly if it hasn't already been done.