Higher numbers of short sales on securitized residential mortgage loans helped bring down first-quarter losses and are expected to continue to reduce the U.S. RMBS loss severity rate.
According to the Fitch Ratings Residential Mortgage Market Index,
Fitch director Sean Nelson attributed the first quarter reverse of what appeared to be a rising trend in the mortgage loss severity rate in past quarters to both short sales and “fewer servicer advances on missed payments and increased home prices.”
These data reaffirm that short sales “typically result in higher recoveries on distressed loans,” Nelson said, since timelines to liquidation are much shorter compared to the full foreclosure process, indicating it benefits the servicer to allow borrowers to sell their property on their own for less than the mortgage amount.
