The Real Deal New York

Loss severities for mortgage-backed securities suddenly up

January 23, 2014 05:30PM

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Global rating agency Fitch Ratings warned U.S. investors that longer foreclosures are increasingly boosting the number of losses arising from residential mortgage-backed securities. After six consecutive quarters of declining loss severities on liquidated real estate mortgage-back securities, severities rose in the fourth quarter of 2013, according to Fitch.

The waning use of short sales is considered the main factor in stretching out the liquidation process. Without a short sale, a borrower will face a foreclosure — if the loan does not resume its performing status.

“Judicial foreclosure states were a particular problem spot with respect to longer timelines last quarter, even as timelines in non-judicial states start to level off,” Sean Nelson, director of Fitch, told Housing Wire. “Longer liquidation timelines result in higher loss severities due to greater carry costs and higher potential for property deterioration.” [Housing Wire]Mark Maurer

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