Servicing Cited in Western Fed Downgrades

The ratings on the senior classes of six Western Federal Savings and Loan Association securitizations have been downgraded as a result of servicing-related cash flow misallocations, Moody's Investors Service has announced.In addition, the ratings of certificates from 15 other Western Fed mortgage-backed deals were placed under review for possible downgrade, the rating agency said. The downgraded securities were the Class A-1 and the interest-only Class A-2 certificates from Western Fed's Series 1990-1, 1990-2, 1990-3, 1990-4, and 1990-5 deals and the Class A certificates from its Series 1991-4 securitization. The actions stemmed from servicing and administrative problems that resulted in significant misallocations of cash flow and losses, one involving more than $900,000, Moody's said. Most pertained to delinquent property taxes and related penalties and fees that were unpaid as a result of the servicer's failure to pursue collection, according to the rating agency. Moody's said the Federal Deposit Insurance Corp., as master servicer of the deals, has indicated that it will cover losses attributable to servicing problems. "However, it remains unclear from the trustee reports whether the full extent of misallocated cash flow and losses has been identified and whether future misallocations will occur and be spotted," the rating agency said. The affected deals used GEMICO pool policies as their primary credit enhancement, but GEMICO rejected some claims because its policies do not cover losses due to weak servicing or special-hazard claims, Moody's said. The Moody's website address is http://www.moodys.com.