Servicing Advance Transactions on the RiseServicing advance transactions are becoming an increasingly common financing type within the RMBS sector, DBRS reported today.In these transactions, the rating agency explained, mortgage servicers securitize their rights to reimbursement for advances made to U.S. RMBS trusts. These advances arise from mortgage servicers being responsible for making certain payments to RMBS trusts when borrowers fail to make loan and other payments.The increased use of these transactions reflects the financial strain that these advances are placing on servicers with the rise in residential mortgages delinquencies, according to DBRS. While servicers are obligated to advance missed payments to RMBS trusts monthly, full reimbursement of these advances might take months or even years to occur.One perk of servicing advance transactions is that servicers are reimbursed for advances before RMBS security holders are paid, the rating agency said.However, these transactions are risky in terms of determining which collections are designated to pay servicing advance note holders. Whether these cash flows are subject to delays, reductions or interruptions are also important considerations.Minimum overcollateralization tests have been established for each advance reimbursement type. This dampens the effect of the dramatic shifts in delayed recovery advances following note issuance.Principal is due upon maturity, which isgenerally five to 10 years after issuance.Servicing advance transactions are becoming an increasingly common financing type within the RMBS sector, DBRS reported today.

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