Moody's Investors Service downgraded Aurora Loan Services' Servicer Quality (SQ) ratings: primary servicer of prime residential mortgage loans downgraded from 'SQ2' to 'SQ3'; primary servicer of subprime residential mortgage loans downgraded from 'SQ2-' to 'SQ4+'; special servicer downgraded from 'SQ2-' to 'SQ4+' and master servicer downgraded from 'SQ1-' to 'SQ3+'
Additionally, the rating agency has placed all the above ratings on review for further possible downgrade.
Aurora is a subsidiary of Lehman Brothers Bank,wholly owned by Lehman Brothers Holdings. Moody's rating action comes after Lehman's announcement that it was filing for Chapter 11 bankruptcy protection after its failure to reach a merger agreement with a stronger strategic partner. According to the firm, none of Lehman's broker-dealer subsidiaries or other subsidiaries will be included in the Chapter 11 filing.
Although Aurora has now maintained servicing performance, Moody's believes that uncertainty remains with regards to stability of the servicing platform in the future.
Aurora Loan Services was established in 1997 through the purchase of certain Harbourton Mortgage Corp. assets by Lehman. Aurora's servicing portfolio totaled $124.5 billion as of Aug. 31. The majority of Aurora's servicing portfolio is comprised of prime and Alt-A loans.
Moody's SQ ratings represent its view of a servicer's ability to prevent or mitigate asset pool losses across changing markets.