The time mortgage loan servicers take to resolve delinquent loans through modification or foreclosure varies widely.
According to an analysis by Moody’s Investors Service, Bank of America has demonstrated
the weakest performance measured both by its speed in resolving the status of delinquent loans and by its proportion of delinquent loans that have yet to be resolved. The ratings agency found that GMAC Mortgage, on the other hand, has generally performed better than its peers.
Moody’s examined seven major servicers and their resolution of delinquent loans held in residential mortgage-backed securities (RMBS). In addition to BofA and GMAC, the subjects of the analysis included Wells Fargo, JPMorgan Chase, CitiMortgage, Ocwen, and Litton Loan Servicing.
The ratings agency looked at residential mortgage loans that were seriously delinquent or in default at any time between June 2009 and August 2010 and that belonged to 2005-2008 vintage RMBS loan pools. The analysis was book-ended with data as of the end of this August so that the results were not skewed by delays resulting from the recent foreclosure affidavit problems and moratoriums that began cropping up in September.
Servicer performance was measured across three main dimensions:
1. For delinquent loans that have neither been permanently modified nor liquidated, the average length of time they have been seriously delinquent;
2. For loans that have been liquidated or modified, the average time taken to liquidate or modify them since they first became seriously delinquent;
3. The relative proportions of a servicer’s loans that at some time in the study’s timeframe were 90 days delinquent and that now reside in each loan status (three or months past due, in foreclosure, or REO).
Overall, Moody’s concluded that Bank of America has performed the worst when it comes to resolving delinquent loans across all three asset classes examined – subprime, Alt-A, and jumbo. The North Carolina-based bank holds the largest proportion of unresolved seriously delinquent loans, and its seriously delinquent loans have generally been delinquent longer than those of the other major servicers.
Moody’s says these observations are particularly true in the subprime sector, in which BofA inherited a large portfolio of poorly-performing loans when it acquired Countrywide.
The agency’s analysts explained that these loans have been unresolved for particularly long periods, primarily because Bank of America agreed in a multi-state settlement with attorneys general in October 2008 to evaluate each modification-eligible Countrywide loan on a case-by case basis and agreed not to initiate foreclosure proceedings until it had exhausted all modification efforts.