U.S. Residential Mortgage Servicer Rating Actions
New York, April 05, 2012 -- Moody's has downgraded the following servicer quality ("SQ")
ratings of Bank of America, N.A., which continue
to be on review for downgrade.
To SQ2- from SQ2 as a Primary Servicer of prime residential mortgage
loans
To SQ3+ from SQ2- as a Primary Servicer of subprime residential
mortgage loans
To SQ3+ from SQ2- as a Special Servicer of residential mortgage
loans
Bank of America, N.A., rated A2 on review for
possible downgrade, is a subsidiary of Bank of America Corporation,
which maintains a long-term rating of Baa1 on review for possible
downgrade.
RATINGS RATIONALE
The downgrade was mainly due to the substantial lengthening of the company's
foreclosure referral and foreclosure sale timelines as a result of the
foreclosure process scrutiny starting in late 2010.
Moody's initiated the review for downgrade on October 4, 2010
based on concerns regarding Bank of America's foreclosure document
execution practices. Since then, Bank of America has resumed
foreclosure proceedings in nearly all judicial states. As a result
of its review of foreclosure document handling practices, Bank of
America identified the need for enhancements to its foreclosure governance
processes, foreclosure document preparation processes and oversight
and monitoring of third-party vendors.
As of June 30, 2011, Bank of America's servicing portfolio
(excluding REO) totaled 12,903,857 loans for an unpaid principal
balance of approximately $2 trillion.
The previous rating action for Bank of America, N.A.'s
SQ ratings occurred on May 3, 2011. At that time and as detailed
below, we downgraded all of the company's SQ ratings.
To SQ2 from SQ1 as a Primary Servicer of prime residential mortgage loans
To SQ2 from SQ1- as a Primary Servicer of second lien residential
mortgage loans
To SQ2- from SQ1- as a Primary Servicer of subprime residential
mortgage loans
To SQ2- from SQ1- as a Special Servicer of residential mortgage
loans
Moody's SQ ratings represent its view of a servicer's ability to prevent
or mitigate asset pool losses across changing markets. The rating
scale ranges from SQ1 (strong) to SQ5 (weak). Where appropriate,
a "+" or "-" modifier will be appended to the relevant rating
to indicate a servicer's relative servicing quality within a particular
category. Moody's servicer ratings are differentiated in the marketplace
by focusing on performance management. SQ ratings for U.S.
residential mortgage servicers incorporate assessments of delinquency
transition rates, foreclosure timeline management, loan cure
rates, recoveries, loan resolution outcomes, and REO
management -- all critical indicators of a servicer's ability
to maximize returns from mortgage portfolios.
Moody's servicer ratings also consider the company's ability to maintain
its focus on high quality servicing in an economic downturn. Servicing
operations can be stressed by increasing the number of delinquent loans
while at the same time increasing the need for liquidity. The SQ
rating reflects our expectation of the impact that the servicing will
have on the on-going credit performance of the portfolio.
For this reason, Moody's monitors SQ ratings based on periodic information
provided by servicers and conducts a formal re-evaluation of its
servicer ratings annually.
The methodology used in this rating was "Moody's Approach to Rating Residential
Mortgage Servicers" published in January 2001. Please see the Credit
Policy page on www.moodys.com for a copy of this methodology.
Other factors used in this rating are described in "Updated Moody's Servicer
Quality Rating Scale and Definitions" published in May 2005.
REGULATORY DISCLOSURES
Moody's considers the quality of information available on the rated entity,
obligation or credit satisfactory for the purposes of issuing a rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a rating is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
third-party sources. However, Moody's is not an auditor
and cannot in every instance independently verify or validate information
received in the rating process.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history. The date on
which some ratings were first released goes back to a time before Moody's
ratings were fully digitized and accurate data may not be available.
Consequently, Moody's provides a date that it believes is the most
reliable and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Gene Berman
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
William Fricke
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's downgrades Bank of America's SQ ratings and maintains review for downgrade