NEW YORK--(BUSINESS WIRE)--The Homeowner Bill of Rights (HBR) enacted by three states in 2013 has had minimal impact on performance in RMBS deals to date, according to Fitch Ratings. With many of the HBR servicing standards already in place as a result of 2012's National Mortgage Settlement (NMS), there have not been meaningful changes to foreclosure initiation rates, foreclosure timelines or short sale rates as a result of the HBR. While to date Fitch has not seen a significant impact on RMBS transactions from these changes, Fitch will continue to monitor the impact of HBRs on these jurisdictions and on RMBS performance and ratings.
In the wake of the housing crisis, an unprecedented number of home foreclosures littered the housing landscape as regulators at both the federal and state levels sought to enact legal provisions that would protect borrowers and formalize servicing practices. The HBR enacted in California, Nevada and Minnesota in 2013 prohibit dual tracking (the practice of offering a loan modification or other foreclosure alternative to the homeowner, while simultaneously pursing the foreclosure process), require assigning a single point of contact (SPOC), ensure the borrower is considered for all loss mitigation options prior to foreclosure, and allow borrowers to seek redress for material violations for the new laws.
There are similarities between the HBR rules and the 2012 National Mortgage Settlement, which established the framework for national servicing standards including better communication with borrowers, appropriate standards for executing documents in foreclosure cases, and ending dual-track foreclosures for many loans. While the settlement pertained to the country's largest banks, many servicers' adopted the spirit of the framework in anticipation of the Consumer Financial Protection Bureau (CFPB) rules which were implemented for all servicers on Jan. 10, 2014. Because many servicers had adapted their practices to conform with the NMS, the HBR rules had minimal additional impact on servicers' processes.
Foreclosure initiation rates have not been materially impacted by the HBR. While foreclosure initiation rates have decreased since the enactment of HBR, the decreasing trend had been occurring since late 2011, before HBR took effect. The three states which passed legislation generally conduct non-judicial foreclosures. There was concern that the enactment of HBR could result in longer foreclosure timelines similar to those seen in states with judicial foreclosure processes. However, early indications are that timelines have not been significantly impacted by HBR to date.
Short sale volumes, which were anticipated to increase as servicers pursued alternatives to foreclosure, continued on a declining trend which began prior to implementation of the HBR rules. Fitch believes other market fundamentals including home price appreciation and modest job growth may have contributed to dampen any widespread adverse effects of the rules. Fitch's analysis indicates that national home prices have increased 16.9% since 2011, while all three states with HBRs saw home price appreciation of 20%-30%.
While other states could adopt similar legislation, Fitch will continue to monitor these trends and their overall impact on the performance of RMBS.
Additional information is available at 'www.fitchratings.com'.