Tag Archives: Moody’s

Moody's Investors Service studied two million loans backing residential mortgage-backed securities (RMBS) pools and found that a loan that is modified and then reported as current is three times as likely to default over the ensuing twelve months as a current loan that has not been modified. The agency's also put the practices of eight major servicers under the microscope. It found that six-month re-default rates vary considerably, from 20 percent for Citi and Litton to 33 percent for Bank of America.

The ups and downs seen in home price data over the past few years indicate a slow recovery in home prices with many false starts, especially in markets riddled with foreclosed properties, according to Fiserv, Inc. But the company's analysts say that while the ebb and flow is not over, they expect 75 percent of U.S. metro areas to see stable prices by the end of 2011. Fiserv says home prices have already leveled out in one of four metro areas.

Word on the street is that recovery is taking hold in the commercial real estate sector. Vacancy rates are starting to decline; delinquencies, although still elevated, are beginning to moderate; and property values are steadily increasing. Data released Monday by Moody's Investors Service validates this last point. The ratings agency reports that U.S. commercial real estate prices increased 0.6 percent in November, marking the third consecutive month of national price gains.

Moody's Investors Service has outlined several credit concerns that have led the agency to decline to give its highest ratings to resecuritizations of U.S. residential mortgage-backed securities (RMBS). Moody's says such denials are becoming more and more common. Among the agency's primary concerns are ambiguities in legal documents and uncertainties resulting from foreclosure irregularities.

The delinquency rate on loans included in conduit and fusion U.S. commercial mortgage-backed securities (CMBS) deals skyrocketed 79 percent over the past 12 months, according to Moody's Investors Service. Delinquencies started 2010 at 4.90 percent. By the end of December, the rate of past-due loans had hit 8.79 percent. The firm's analysts are expecting the delinquency rate to continue rising in 2011, but at a slower pace than it has over the past two years.

As the backlog of foreclosures continues to drive down housing prices, losses on private-label residential mortgage backed securities (RMBS) will increase in 2011, according to Moody's. The forecast for more red ink seeping from home loans sold to investors comes despite the fact that the agency believes the rate at which loans become delinquent will decline during the year. Moody's expects flaws in foreclosure practices that have recently come to light to delay foreclosures by three to six months, further extending the window of losses for investors.

Moody's recently published 2011 Mortgage Servicers Outlook predicts more troubles ahead for servicers regarding foreclosure practices and documentation. The agency says more scrutiny of procedural irregularities could allow for definition of just how bad things are, but the added scrutiny could also lead to the discovery of even more problems with foreclosure practices. Moody's says foreclosure flaws will add at least three months to the timeline it takes to foreclose on properties.

Moody's Investors Service says its gauge of commercial property prices rose 1.3 percent from September to October, marking the second consecutive monthly increase recorded by the company. According to the Moody's/REAL Commercial Property Price Index released this week, as of the end of October, prices nationally were up 3.2 percent from their year-ago levels. Even with the recent gains, the index is down 34.4 percent from two years ago, illustrating just how steep commercial property values have plunged.

Moody's rating service and Fitch Ratings both reported increases in defaulted commercial mortgage-backed securities (CMBS) last month, of 24 and 18 basis points, respectively. Both companies show the office sector with the greatest increases in delinquencies across the five core property types in November.

The time mortgage loan servicers take to resolve delinquent loans through modification or foreclosure varies widely. According to an analysis by Moody's Investors Service, Bank of America has demonstrated the weakest performance measured both by its speed in resolving the status of delinquent loans and by its proportion of delinquent loans that have yet to be resolved. The ratings agency found that GMAC Mortgage, on the other hand, has generally performed better than its peers.