A deal was recently reached for securitized loans serviced by bankrupt Taylor, Bean and Whitaker Mortgage Corp. to be serviced by another company. But the new servicer has its hands full.
Two weeks before the Ocala, Fla.-based company filed for Chapter 11 Bankruptcy in August, Wells Fargo Bank — the master servicer on six TBW Mortgage-Backed Trust issuances from 2006 and 2007 — terminated Taylor Bean as primary servicer, Moody’s Investors Service said in a newsletter today.
In bankruptcy court, Taylor Bean challenged Wells Fargo’s decision, and the termination was stayed.
The ordeal took two months and has bondholders now facing their third missed monthly payment.
But the servicing has finally been transferred to American Home Mortgage Servicing Inc., the unit assembled by billionaire Wilbur Ross from the remnants of failed American Home Mortgage Investment Corp. and defunct Option One Mortgage Corp.
American Home is expected to begin servicing the loans this week.
The transfer was accomplished through multiple court proceedings.
“Indeed, the transfer happened only after Wells Fargo and TBW struck a behind-the-scenes deal blessed by the court,” Moody’s wrote.
The court approved the joint stipulation on Oct. 8 and its implementation on Oct. 16.
Still, it may take a while before investors see pool performance improve because the Federal Deposit Insurance Corporation froze Taylor Bean’s transaction accounts held by failed Colonial Bank in August — causing checks to go undeposited and electronic payments to fail. The lack of working bank accounts created chaos for the servicer system, borrower records and actual borrower payments.
While the FDIC has agreed to deliver uncashed borrower payments to the successor servicer, the payments still need to be processed.
“But these disbursed funds can’t be used until the FDIC and other interested parties in TBW’s bankruptcy approve a master reconciliation, which has yet to be produced,” Moody’s said. “All these events mean the new servicer for the TBW deals will face reconciliation challenges.”
