Loan modifications will grow to 15% of 2005-2007 vintage securitized mortgages over the next twelve months from zero, Fitch Ratings said today.
This estimate, said the rating agency, is based on the modifications done by banks on their own loans and the level of inquiry Fitch has gotten regarding proposed changes to deal documents expanding the servicers ability to do modifications.
To date, there have been few bank announced foreclosure moratoriums and modification programs that will apply to securitized mortgages; the bank announcements so far apply only to mortgages owned by the bank and sitting on its balance sheet.
But, Fitch is aware of several servicers of securitized loans that are modifying loans within the scope of existing deal documents. Recent bank data indicates that the 14 largest banks and thrifts modified 187,000 mortgages in the first half of 2008.
There will be a rise in securitized loan modifications if only to make sure that borrowers in a securitized pool are being treated equally versus those whose mortgages are held by a bank, as well as to fulfill the servicers duties to maximize returns to the trust said Group Managing Director and U.S. RMBS group head Huxley Somerville.
Recently, California has passed legislation requiring servicers to delay foreclosing on homes, while banks like JPMorgan Chase and Citibank have voluntarily announced that they will temporarily stop foreclosing on properties.These steps were made to give borrowers and servicers a chance as well as the additional time to modify troubled loans and allow borrowers to stay in their homes, according to the rating agency.