THIS TOO SHALL PASS
NOVEMBER 4, 2010: Fitch Ratings said the robo-signing scandal is negatively affecting servicing of residential mortgage-backed securities. The new warning comes as the mortgage industry has predicted that the fallout from the scandal would be limited.
As of Thursday, Fitch holds a negative outlook for the RMBS servicer sector, which was previously stable.
In short, the costs of dealing with the allegations are proving too heavy to maintain a sunny disposition on RMBS servicing.
“Risks to servicers (now) include cost to research and remediate any errors, additional fees and resources, potential penalties and reputational risk,” said Diane Pendley, head of U.S. RMBS Operational Risk for Fitch, in a statement.
Bank of America (BAC: 12.13 +5.30%) originated $73 billion in first mortgages in the third quarter, down 24.7% from a year ago, according to a report the bank put out Thursday.