A new report rates the biggest servicers of securitized mortgages. Among poor performers, the integration of acquired servicing operations was a big obstacle to better performance. Many of the loans that became delinquent over the past year were secured by Golden State properties.
The report analyzed the largest third-party servicers for residential mortgage-backed securities.
Released Friday by Moody’s Investors Service, the first Servicer Dashboard reflects activity for securitized Alt-A, jumbo and subprime loans during the 12 months ended June 30.
The dashboard shows variations in the servicers’ abilities to prevent delinquency and improve the cure rates through modifications, foreclosures and other means, according to Moody’s.
Dashboard metrics include current-to-worse collection roll rates. Total cure and cash-flowing modification re-default rates are also featured, as are servicing timelines.
“The inaugural ‘dashboard’ finds that Chase and Bank of America exhibited poorer overall performance relative to other servicers analyzed,” Moody’s stated.
On jumbo mortgages, Chase’s re-default rate was worst among big servicers at 39 percent. BofA had the highest Alt-A re-default rate at 47 percent, while its subprime ranking was worst at 55 percent.
Performance at the two servicers was hurt by significant acquisitions of loans and servicing platforms, according to Moody’s Senior Credit Officer William Fricke. He called the integration of the platforms and people and processes an “enormous task.”
Fricke said the banks were less prepared to handle growing delinquency.
He also laid some of the blame for the weak performance on the imposition of “robo-signing” related foreclosure moratoria in the second half of last year. Foreclosure sales that were already in process were suspended, and the foreclosure process on distressed loans was delayed.
BofA had a 348-day foreclosure timeline on jumbo loans, the longest of the servicers listed. Wells’ 430-day Alt-A timeline was longest, and the longest subprime timeline was GMAC’s 585 days.
The 191 days between the foreclosure sale and REO liquidation was longest on Alt-A loans at Wells Fargo. Ocwen had the longest time frame in this category for subprime loans: 237 days.
Although mortgage servicers have made headway in addressing foreclosure documentation concerns, “robo-signing” issues are expected to continue to expand foreclosure timelines during the fourth quarter.
Performance was better at CitiMortgage Inc. and Ocwen, which didn’t impose foreclosure moratoria during the time frame of the report.
GMAC Mortgage and Ocwen provided loan modifications to borrowers with verified information before such full documentation was required by the Home Affordable Modification Program — cutting the rate of re-defaults on modifications.
Re-defaults on modified jumbo mortgages were lowest among the top servicers at GMAC, which had a 20 percent rate. GMAC’s subprime modified loan re-default rate was also lowest at 34 percent, and it had the second-lowest Alt-A rate: 29 percent.
GMAC’s 127 days was the shortest timeline between jumbo foreclosure sales and REO liquidation. It also had the shortest liquidation time for subprime mortgages: 161 days.
CitiMortgage had the lowest Alt-A modification re-default rate at 29 percent.
“CitiMortgage, GMAC and Ocwen generally exhibited stronger servicing performance,” the report said.
Citi had the shortest Alt-A foreclosure timeline at 366 days, while Chase’s 158 days from foreclosure sale to REO liquidation on Alt-A loans was lowest.
Ocwen’s 376 days for subprime foreclosures was shortest among servicers listed in that category. Wells’ 273 days was the shortest jumbo timeline reported.
But Citi was weak with its jumbo timeline from foreclosure sale to REO liquidation, taking 159 days.
Fricke explained that differences in portfolio characteristics like state concentration and loan quality can influence portfolio performance metrics and need to be accounted for in a meaningful comparison.
More than half of jumbo mortgages that became delinquent and handled by the biggest servicers were secured by California properties.
On Alt-A loans, the California ratio was between a quarter and a half, while it ranged from 16 percent to nearly a third for subprime loans.
