Alt-A, Jumbo RMBS Performance Improves

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MORTGAGE EXPERT
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The quarterly performance of Alt-A and jumbo loans that are included in residential mortgage-backed securities improved. But foreclosure timelines are expected to deteriorate, with turnaround in judicial states more than double the time frames in their non-judicial counterparts. One mortgage servicer was cited for its deteriorating performance that is the result of a recent acquisition.

A bigger share of securitized jumbo mortgages was current in the fourth quarter than three months earlier, while early-stage delinquencies declined during the same period.

It was the same story for Alt-A loans.

The findings were reported Thursday by Moody’s Investors Service.

The improvement likely reflects strengthening economic conditions and lower unemployment.

The average foreclosure timeline was 654 in judicial states as of Dec. 31, 2011. Processing time was far worse than in non-judicial states, where the timeline was only 297 days.

Moody’s Senior Credit Officer William Fricke warned in the report that the timelines will worsen as aged foreclosures work their way through the process.

“The extended timelines will result in additional costs and increased loss severities to RMBS trusts,” Fricke stated.

Moody’s singled out Ocwen Financial Corp. as a poorly performing servicer — with its collections, loss mitigation and foreclosure timeline metrics deteriorating in the fourth quarter.

“The Litton acquisition resulted in an increase in loans that rolled from current status to delinquency as well as a decline in seriously delinquent loans that were cured or received cash flow,” Fricke explained. “For the period we are measuring, Ocwen had limited time to influence the performance of the Litton portfolio since the acquisition.”

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