Transferring the Servicing of RMBS Portfolios Improves Long-Term Performance

Posted by Bill Hunt on Mon, Apr 01, 2013


More active management by acquiring servicers drives success 

A research report published today by Opera Solutions said that transferring RMBS portfolios to new servicers is working. The study showed that new acquirers more actively managed their portfolios, resulting in faster liquidations and better performance on modified loans. It indicated increased stability in the RMBS market overall.

The study followed 12 banks and loan servicers from both sides of servicing transfers. It tracked nine months of post-transfer activity (60+ delinquencies, FC/REO rates, and loss severities) to assess performance and sustained impact. It also assessed loan modifications to determine whether servicers maintained lower delinquencies post-mod.

“Acquirers are actively managing their portfolios, resulting in better performance overall,” said Bill Hunt, vice president, Opera Solutions. “After diligently flushing foreclosure pipelines upon acquisition, post-transfer FC/REO rates have remained lower. Further, acquirers have increased loan mod activity, and have been able to maintain lower 60+ delinquency rates post-mod.”

The study also highlights the fact that patterns vary by servicer. Ocwen, the largest acquirer of loans, engaged in a high level of servicing activity immediately following a transfer. FC/REO and default rates showed initial increases followed by a period of stabilization, indicating Ocwen’s efforts to flush foreclosure pipelines. Over time, 60+ delinquencies decreased steadily as loan performance stabilized, in some cases due to loan mods.

Conversely, loans formerly serviced by Bank of America (many picked up by Select Portfolio Servicing) have shown lags of several months before performance improved. “This is not entirely unexpected; a new servicer may need more time when on-boarding loans to correct data issues before commencing collections,” said Hunt.

Loan mod effectiveness also varied among the states, with New York and California performing well on both FC/REO and 60+ delinquencies.

Topics: Mobiuss