Loss severities dropped across all the indices by 1.0, 1.7, 4.9, and 3.2 points to 82.4%, 83.4%, 87.5%, and 90.5% for the 06-1 through 07-2 indices, respectively, as reported by Bank of America Merrill Lynch analysts.

Most transactions showed dips in losses resulting from loan modifications due to forbearance recognition, principal forgiveness, and/or the recovery of servicer advances.

Several Ocwen Loan Servicing-serviced deals, which last month showed considerable jumps in severities, pulled back this month, including Nomura Home Equity Loan, Inc. 2007-2, which showed reported severities such as losses from modification of 72%, decreasing from 212%.

The April remittance reports also showed that CDR rates increased. They came in at 10.1%, 13.4%, 12.9%, and 11.4% CDR for the 06-1 through 07-2 indices, analysts said.

The rate increase comes off of a depressed liquidation period during 4Q10 and 1Q11, as servicers had to deal with distressed loan processing problems due to foreclosure-gate issues. Ocwen and Carrington Mortgage Services default rates are still printing in the mid-teens to low twenties. This month Bank of America Merrill Lynch-serviced pools (HLS-, Wilshire Credit Corp.-, and Countrywide-serviced) also saw increases to 10.1%, and 9.4%, and 8.5% CDR compared with 6.3%, 5.8%, and 5.2% last month, BofA Merrill analysts said.

Given that the details regarding the foreclosure-related regulator settlement were released recently, analysts do not believe the market is "quite out of the woods yet" in terms of slow liquidations.

For one, an Attorneys General settlement should be next, they said. Any settlement is probably going to include mandated changes to the servicing process, which should take some time to implement. Also there are the potential national servicing standards that may come out of the  Consumer Financial Protection Bureau, BofA Merrill analysts indicated.

However, analysts said that the recent settlement terms with regulators contained recommendations which they believe that servicers were likely in the process of implementing anyway.

The procedural impact should not prove to be too disruptive, given the big bump in the road resulting from foreclosure-gate. From here on out, disruptions are unlikely to be onerous, but perhaps time-consuming.

Modification rates remained virtually unchanged once again for most of the indices. All the indices currently have modification rates between 1.0% to 1.1%. Ocwen (HomEq Servicing) and American Home Mortgage Servicing-serviced transactions still have elevated modification rates averaging 1.7% of outstanding loans for April remittance, while Chase and BofA deals are still lower than the average at 0.5%.

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