Ratings Agency
By Esther Cho | 04/17/2012
Based on a metric devised by Moody’s Analytics, GMAC, SLS, and American Home performed better compared to other subprime servicers in terms of cash collected relative to losses on delinquent loans. This was mainly due to shorter liquidation timelines that resulted in lower loss severities on liquidated or foreclosed properties, according to an article in Moody's ResiLandscape. GMAC's high metric is due primarily to shorter liquidation timelines and because the servicer maximizes cash flow on modified loans by keeping the re-default rates in line with the industry average even though it offers relatively low levels of relief in terms of principal and interest.
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By Krista Franks Brock | 03/01/2012
Principal reductions have been approached with some reluctance and much debate throughout the industry, but as part of the recent $25 billion settlement with the state attorneys general, the nation's largest servicers have agreed to administer the loss mitigation tactic. Fitch maintains the issue of principal reductions is not a simple "yes" or "no" question, and "if not implemented carefully, a wide-ranging principal reduction program could potentially increase defaults among borrowers who would otherwise remain current."
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By Carrie Bay | 02/08/2012
Analysts at Fitch Ratings expect to see a sharp rise in the cost to service mortgage loans. They describe the housing recovery in the U.S. as "unhurried" and as a result, they say lenders have been forced to shoulder higher foreclosure expenses. Fitch says increased foreclosure costs compounded by credit, compliance, regulatory, and other real-estate owned expenses are beginning to have a profound effect on the industry. The agency estimates the cost of servicing nonperforming loans is likely to double from pre-crisis levels.
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By Krista Franks | 01/26/2012
Illinois Attorney General Lisa Madigan filed a lawsuit against Standard & Poor's this week alleging the ratings agency inflated ratings of mortgage-backed securities investments - an act Madigan believes triggered the financial crisis. The suit, filed in Cook County Circuit Court, relies on internal emails from within the ratings agency as evidence of the company's misrepresentations of risk. Madigan references congressional testimony from a former managing director at S&P, stating "profits were running the show."
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By Carrie Bay | 11/30/2011
Fitch Ratings has lowered its ratings outlook for Fannie Mae and Freddie Mac as a result of the mortgage financiers' reliance on the U.S. government. Fitch revised a stable outlook for debt held by Fannie and Freddie to negative, but reaffirmed the AAA-ratings in place for the GSEs. It's not just the government-backed mortgage companies that are feeling the pinch from ratings agencies. Standard & Poor's has downgraded the long-term credit ratings of several major U.S. mortgage lenders, including BofA, Citi, and JPMorgan Chase.
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By Carrie Bay | 09/30/2011
Mortgage servicer Residential Credit Solutions (RCS) stands out from the crowd in today's world of almost commonplace ratings downgrades and default servicing challenges. RCS has been awarded two upgrades from Fitch of its primary servicer rating for subprime products and its special servicing rating. Fitch said the rating actions reflect the company's 'high touch' servicing approach, competitive performance metrics, and effective default and foreclosure practices.
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By Carrie Bay | 09/26/2011
The nation's foremost securities regulator is considering a civil injunction against Standard & Poor's (S&P) for its rating of a collateralized debt obligation (CDO) linked to high-risk mortgages. S&P's parent company told investors Monday it received notice that the Securities and Exchange Commission (SEC) may proceed with enforcement actions and monetary penalties. At the center of the investigation is a $1.6 billion CDO from 2007, which has been cited as an example of why the financial crisis ran so deep.
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By Krista Franks | 09/22/2011
The three major banks that received downgrades from Moody's this week responded with assertions of their value. Bank of America's and Wells Fargo's long-term credit ratings were downgraded, while Citigroup was hit with a downgrade of its short-term credit rating. Moody's says the downgrades stem from its belief the government is more likely now than during the financial crisis to allow a large bank to fail. The banks say that assessment is more a reflection on systemic support than their own liquidity profiles.
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By Krista Franks | 09/07/2011
At a congressional hearing Wednesday, witnesses voiced concerns about the government's participation in the mortgage market as well as the lack of transparency between servicers and investors. One analyst described the U.S. housing finance system, where the GSEs account for over 90 percent of new mortgages, as "problematic." Others said government is crowding out the private market with programs that make below-market-rate loans available to nearly all borrowers, and they advocated for the expiration of increased conforming loan limits.
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By Krista Franks | 09/01/2011
Sen. Al Franken of Minnesota continues to express concerns that the new rules regarding ratings agencies are not addressing fundamental issues with ratings procedures. Franken, along with other congressmen and policymakers, believes ratings agencies inflated assessments of mortgage-backed securities and that these inflated ratings ultimately led to the financial crisis. During a conference call hosted by Americans for Financial Reform, Franken and others spoke out on the inherent conflict of interest they see within ratings procedures.
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