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Tag Archives: RMBS

Report: Short Sales Replacing Mods as New Norm

Among the available foreclosure prevention tools, short sales are becoming the weapon of choice for servicers while the use of loan modifications has slowed, data from Fitch Ratings revealed. For example, among bank servicers, the percentage of resolutions in the loan modification category decreased to 26 percent in the last half of 2012 from 57 percent in the first half of 2010, according to Fitch's latest quarterly index. Meanwhile, short sales showed significant increases over the last couple of years. In 2012, short sales represented 51 percent of resolutions for bank servicers, up from a low of 20 percent in 2010.

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Rising Prices, Shrinking Delinquencies Reduce Future RMBS Losses

As home values improve and servicers continue to ramp up efforts to reduce delinquent pipelines through short sales and loan modifications, the composition of RMBS loan pools outstanding should also improve, according to Moody's most recent ResiLandscape. According to analysts from Moody's, rising home prices motivate current borrowers to avoid default, and they increase the proportion of current loans with loan-to-value (LTV) ratios below 100, which are the loans that are the least likely to go incur losses.

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Fannie Mae Releases Credit Performance Data for Over 18M Mortgages

Fannie Mae made available loan-level credit performance data for single-family mortgages delivered to the GSE from January 1, 2000 to March 31, 2012. The release of the new data marks a step toward greater transparency. Through the data, investors can model the credit performance of Fannie Mae loans and analyze potential risk sharing transactions. In a statement, FHFA applauded Fannie Mae's release, explaining it ""represents an important step toward returning private capital to the mortgage market.""

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Moody’s: Home Prices to Increase, Loss Severities to Remain High

Home prices will increase over the next three years as the economy expands and servicers work through their distressed inventories, according to a report from Moody's Analytics. Home prices will rise about 4.2 percent between the fourth quarter of last year and the fourth quarter of 2015, Moody's projected. The firm also anticipates foreclosures will have less of a hold on home prices in years to come as ""fundamentals that normally drive house prices"" come back into play, including ""job growth, demographics, affordability, and supply conditions.""

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S&P Seeks to Dismiss Securities Suit

Attorneys for Standard & Poor's (S&P) filed Monday a motion to dismiss a civil lawsuit from the federal government accusing the ratings agency of inflating ratings and misrepresenting the creditworthiness of certain securities. Led by Attorney General Eric Holder, the Department of Justice announced in early February a complaint against S&P for allegedly defrauding investors in an attempt to gain more business. At the time, Holder noted that his department had identified more than $5 billion in losses to federally insured financial institutions resulting from collateralized debt obligations (CDOs) rated by S&P between March and December 2007.

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Rise in Prices, Use of Short Sales Lead to Declining Loss Severities

Rising home prices and higher levels of short sales are leading to declining loss severities in the residential mortgage-backed securities (RMBS) market, according to Fitch Ratings. The agency's quarterly report noted its Loss Severity Index declined from 67.5 percent in the first quarter of 2012 to 64.2 percent in the first quarter of this year. Loss severities on short sales tend to be 10 to 15 percent lower than loss severities on REOs, according to Fitch. Also, short sales are generally resolved about 12 months sooner than REOs, the agency stated.

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Performance Improves After Servicing Transfers Across Industry

Since the housing crisis, many large banks have sold off servicing portfolios to smaller, emerging companies. According to a recent study, these portfolios often begin to perform better after the transfers. Opera Solutions found faster liquidations and better long-term performance for modified loans after portfolios were sold. According to the study, two servicers stand out for acquiring the ""lion's share"" of servicing rights--Ocwen and Nationstar. At Ocwen, which acquired the most loans, the study detected higher levels of foreclosures and REO rates immediately following acquisitions. However, after a period of months, Ocwen's portfolios stabilized and improved.

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FHFA OIG: GSEs Face Significant Loss from Interest Rate Risks

Fannie Mae and Freddie Mac are at risk of losing billions as a result of fluctuations in interest rates, according to a white paper from the Federal Housing Finance Agency (FHFA) Office of Inspector General (OIG). According to the OIG's paper, an increase of just 1 percentage point in interest rates could cause the GSEs to lose nearly $2 billion in the fair value of their assets. To protect against interest rate risks, the OIG outlined its own suggestions, one of which included the use of derivatives.

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Fitch: Prepayment Rates Elevated on Newer Loans

Mortgages originated from 2010 and into early 2012 are seeing elevated prepayment rates as low mortgage rates continue to encourage refinance activity, Fitch Ratings explained in a recent report. Despite the high levels of prepayment activity, the rating agency suggested ""the credit implications have been modest to date due to the high overall credit quality of the original pools."" According to Fitch, prime RMBS mortgage pools issued since 2010 had an average conditional prepayment rate (CPR) of about 42 percent.

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Moody’s Expresses Concerns Over Weak RMBS

As Moody's rates residential mortgage-backed securities (RMBS) in post-crisis years, the firm continues to harbor some concerns about the strength of some loan pools. ""The decline of the US housing market that led to investor losses exposed limitations and flaws in many aspects of the RMBS framework,"" Moody's Investors Service stated in a report authored by VPs Kathy Kelbaugh and Yehudah Forster.

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