NEW YORK--(BUSINESS WIRE)--The second quarter of 2013 continued to see movement of non-agency RMBS away from banks and into the hands of non-bank servicers, according to a new report from Fitch Ratings. Additional large mortgage servicing right (MSR) transfers are scheduled to be completed in the last half of 2013, which continues to signal the banks' strategies to offload defaulted/high-risk loans.
In addition to its acquisition of the Homeward Residential and GMAC Mortgage portfolios, Ocwen announced its intention to acquire MSRs from IndyMac Mortgage Services, a division of OneWest Bank, FSB and from Greenpoint Mortgage Funding, Inc. With the acquisition of Homeward Residential and GMAC Mortgage completed, Ocwen not only materially increased its volume of subprime loans, but added both prime and Alt-A products to its portfolio mix. At end of the second quarter, Ocwen was servicing 47% of all non-agency RMBS subprime loans. Nationstar continues onboarding its sizeable MSR acquisition from Bank of America that was announced in January.
The second quarter also saw servicer-related loss volatility as several servicers and master servicers adjusted principal forbearance loss reporting. Both Ocwen and Nationstar passed through roughly $1 billion in principal forbearance-related losses during the quarter as part of their acquisitions of portfolios. This has led to concerns regarding servicer and master servicer reporting and the timing of loss recognition. Fitch believes this reporting issue will continue to drive further loss adjustments in the third quarter.
Overall, delinquencies and foreclosures continue to decrease. However, residential mortgage servicers are still faced with issues regarding management of foreclosure and delinquency timelines. There continues to be a marked difference in the time to resolve delinquent loans between bank and non-bank servicers due to many factors, including regulations and staffing levels. Fitch believes that it will be challenging for non-bank servicers to maintain shorter timelines as additional highly delinquent loans move from the banks' portfolios to the non-bank servicers' portfolios.
Additional information is available at www.fitchratings.com.
Applicable Criteria and Related Research: RMBS Servicing Index - U.S.A.