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Reporting Errors Jeopardize Wells’ Servicer Rating

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Reporting errors by a unit of Wells Fargo & Co. on residential mortgage-backed securities has prompted a warning about its master servicer rating.

Subsidiary Wells Fargo Bank, N.A.’s, master mortgage servicing portfolio consisted of 1,527,164 loans for $294 billion as of June 30. (Mortgage Daily originally incorrectly reported the size of the master portfolio at $1.527 billion)

The portfolio left the Sioux Falls, S.D.-based company responsible for the reporting and remitting of 1,749 RMBS transactions as of mid-year.

But on some of those transactions, the bank has made a series of reporting errors on mortgages that had loan modifications, according to Moody’s Investors Service.

As a result, bond reporting reclassifications were required on a number of RMBS, while restatements were required in other situations. In some cases, both reclassifications and restatements were required.

In addition there were interest shortfalls on some RMBS transactions.

The reporting errors — along with needed improvement in oversight and technology functions to prevent, identify and remediate future reporting errors — has the ratings agency putting Wells Fargo’s SQ1 residential master servicer rating on watch for a possible downgrade.

However, Wells Fargo has disclosed remediation plans that include increased dialogue with primary servicers, Moody’s said. It has monthly calls with its largest servicers and quarterly calls with others to discuss reporting and relationship issues.

Remediation plans additionally include increased loan accounting reconciliation procedures and employee training.

“Moody’s review will include monitoring the level of restatements and interest shortfalls as well as the results of the company’s remediation plan,” the report stated.

A Wells Fargo spokesman was not immediately able to respond to a request for a comment.

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