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28 Feb 2005
MOODY'S AFFIRMS HOMECOMINGS' RATINGS OF SQ1 AS PRIMARY SERVICER OF PRIME/ALT-A, AND SECOND LIEN RESIDENTIAL MORTGAGE LOANS AND ASSIGNS HOMECOMINGS AN SQ1 RATING AS PRIMARY SERVICER OF HLTV RESIDENTIAL MORTGAGE LOANS
US RESIDENTIAL MORTGAGE SERVICER RATING ACTIONS
New York, February 28, 2005 -- Moody's Investors Service has affirmed Homecomings Financial Network,
Inc.'s ("Homecomings") SQ1 ratings, Moody's highest
rating, as Primary Servicer of prime/Alt-A, and second
lien residential mortgage loans and assigned an SQ1 rating as Primary
Servicer of HLTV residential mortgage loans. Moody's ratings
are based on strong collection results, strong loss mitigation for
prime/Alt-A and second lien loans, above average loss mitigation
for HLTV loans, above average foreclosure and REO timeline management
for prime/Alt-A loans, and strong servicer stability.
Homecomings is a subsidiary of GMAC-RFC. Homecomings performs
primary and special servicing for GMAC-RFC, which is engaged
in purchasing and securitizing residential mortgage loans. Homecomings'
servicing portfolio totaled approximately $84 billion as of December
31, 2004. The portfolio includes prime, Alt-A,
subprime, second lien, and HLTV loans. Homecomings
operates three servicing centers in Dallas, Texas, San Diego,
California, and Blue Bell, Pennsylvania. A portion
of its first lien (pre-30 days delinquent) collection calls are
outsourced to a third party vendor.
Homecomings' prime/Alt-A and second lien collection abilities
and loss mitigation results are viewed by Moody's as strong*.
Of the prime/Alt-A loans that began a 12-month static pool
analysis as 30 days delinquent, 69% improved in terms of
delinquency while 64% of the loans that began the static pool analysis
as 60 days delinquent improved in terms of delinquency. Sixty-three
percent (63%) of the loans that began the static pool analysis
as 90+ days delinquent or in bankruptcy (excluding REO) were cured
or became cash flowing. Of the second lien loans that began a 12-month
static pool analysis as 30 days delinquent, 64% improved
in terms of delinquency while 56% of the loans that began the static
pool as 60 days delinquent improved in terms of delinquency. Fifty-six
percent (56%) of the loans that began the static pool analysis
as 90+ days delinquent or in bankruptcy were cured or became cash
flowing. Homecomings' HLTV collection abilities are viewed
by Moody's as strong and loss mitigation results as above average.
Of the HLTV loans that began a 12-month static pool analysis as
30 days delinquent, 48% improved in terms of delinquency
while 43% of the loans that started in the static pool as 60 days
delinquent improved in terms of delinquency. Forty-five
percent (45%) of the loans that began the static pool analysis
as 90+ days delinquent or in bankruptcy were cured or became cash
Homecomings has increased the flexibility of its repayment plans,
which has positively impacted the resolution rate of their seriously delinquent
loans. In addition, Homecomings has been innovative in its
approach to working with delinquent homeowners. For example,
Homecomings initiated the Home Ownership Preservation Enterprise,
a partnership between local government, community housing development
organizations, and servicers, to facilitate communication
and leverage resources when working with delinquent homeowners.
Homecomings also provides job search assistance, free credit counseling
and educational programs for its delinquent homeowners. In Moody's
opinion, Homecomings' homeowner-focused initiatives
are proactive measures that have been taken to help cure delinquent loans.
Moody's considers Homecomings' prime/Alt-A foreclosure
and REO timeline management to be above average*. Moody's
evaluates servicers' timeline management in three main areas:
1. Missed Payment to Foreclosure Referral
On average, Homecomings referred prime/Alt-A loans to foreclosure
at the 99th day of delinquency, which includes delays experienced
prior to foreclosure referral. Over the past two years, predatory
servicing concerns have led to additional pre-foreclosure activities
to ensure the thoroughness of collection and loss mitigation. This
has increased the duration of the period from the missed payment date
to the foreclosure referral date for some residential mortgage servicers.
In response to these concerns, foreclosure referrals are now more
common after the 90th day of delinquency.
2. Foreclosure Referral to Sheriff Sale
On average, Homecomings completed sheriff sale 182 days after the
referral date. The duration of the foreclosure sale is significantly
influenced by property location, and other delays primarily outside
servicers' control, such as borrower bankruptcy. The
state in which the property is located is a determinant of whether the
foreclosure process is carried out under a judicial or non-judicial
process. The principal difference is that the judicial procedure
requires a court to intervene, extending the duration of the foreclosure
process. Moody's neutralizes the impact of location on a
servicer's ability to manage the foreclosure process by measuring
a servicers' foreclosure timelines relative to a state-weighted
Freddie Mac timeline. Homecomings completed the foreclosure sale
45 days beyond the state-weighted Freddie Mac timeline.
Forty-four percent (44%) of foreclosures had delays beyond
Homecomings' control. In analyzing a servicer's foreclosure
timeline, Moody's evaluates loans with and without delays,
the proportion of loans with delays, and their subsequent effect
on timeline performance.
3. REO Acquisition to Disposition, Net of the Redemption
Homecomings liquidated its REO in 219 days, on average. The
liquidation period is influenced by the level of REO properties undergoing
eviction proceedings, as well as the level of REO properties undergoing
refurbishment efforts. Forty percent (40%) of the REO properties
included in Moody's analysis experienced delays due to eviction.
Moody's views Homecomings servicing stability as strong.
Homecomings is a wholly-owned subsidiary of GMAC-RFC.
The ultimate holding companies of GMAC-RFC, General Motors
Acceptance Corporation and General Motors Corporation, are rated
Baa1 and Baa2 for senior unsecured debt, respectively.
GMAC is considering a restructuring of its residential mortgage operations
within a newly formed holding company to be named Residential Capital
Corporation ("RCC"). GMAC's two residential mortgage
operations, GMAC Mortgage Corporation and Residential Funding Corporation,
would become wholly owned subsidiaries of RCC. RCC would seek a
stand-alone credit rating based on its separate capital structure
and corporate governance protections.
Moody's SQ ratings represent its view of a loan servicer's
ability to prevent or mitigate mortgage pool losses across changing markets.
The rating scale ranges from SQ1 (strong) to SQ5 (weak). Moody's
servicer ratings are differentiated in the marketplace by focusing on
performance measurements. Every rating incorporates an assessment
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 get maximum 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. Ratings
are assigned with the understanding that a servicer's effectiveness can
have a strong impact - either positive or negative - on
credit enhancement levels, particularly with lower rated securities.
For this reason, Moody's conducts a formal re-evaluation
of its servicer ratings annually.
*Please see "2004 Review and 2005 Outlook: US Servicer
Ratings" January 12, 2005 for detailed performance comparisons
for residential mortgage servicers
Senior Vice President
Structured Finance Group
Moody's Investors Service
Fei Fern Wang
Structured Finance Group
Moody's Investors Service
No Related Data.
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