Reconciliation Woe Could Hurt SAF's Ratings If Not Corrected

Certain deficiencies in the reconciliation process for AH Mortgage Advance Trust 2009-ADV have led Moody's Investors Service to put the servicing advance facility's ratings on watch for possible downgrade. Potentially affected are up to $225 million in securities issued in the deal, which are backed by reimbursement rights for servicing advances that America Home Mortgage Servicing Inc. makes on certain residential mortgage-backed securities. The rating action reflects concerns about "a significant number of aged reconciliation items outstanding" in AHMSI's custodial bank accounts. AHMSI said reporting inconsistencies between two different technology systems are involved and at the time of this writing it had most recently estimated it would be able to fix the problem in four to six months. Reconciliation items, or discrepancies between cash book/loan level records and those shown on monthly bank statements, are "not uncommon," Moody's said. But "servicers will typically resolve such items within 30 days of being identified," the rating agency said. "As items age beyond 30 days or more, the probability that either the servicer or the SAF may suffer a loss increases, although there has been no evidence of this from items cleared to date," Moody's added. In addition to the age and number of the items, the rating agency is concerned that "even as AHMSI has cleared a large number of outstanding items, new reconciliation items have been created."