As part of Moody’s surveillance process of residential mortgage-backed securities transactions, it regularly meets with servicers to monitor their quality and discuss any changes to the servicing infrastructure since Moody’s previous visit. On 22 March, Moody’s met with Kensington Mortgage Company Ltd., which is the special servicer for 11 Moody’s-rated outstanding RMBS transactions:
– Seven Residential Mortgage Securities transactions
– Three Money Partners Securities transactions
– Kensington Mortgage Securities plc Series 2007-1.
As of February 2010, the total outstanding balance of these 11 transactions was £2.4bn.
As special servicer for these transactions, Kensington’s responsibilities include overseeing the day-to-day operations of Homeloan Management Limited which is acting as the loan administrator for these transactions.
Moody’s says since its prior review, Kensington has continued to invest in its servicing operations to strengthen its infrastructure and controls.
Moody’s continues to view positively Kensington’s behavioural score and data mining infrastructure, which drives its call collection campaigns.
In Moody’s opinion, this further assists the servicer in developing collection strategies, which ultimately aim at maximising recovery.
Moody’s observes that the number of months that a borrower is delinquent at repossession has continuously increased between November 2008 and the beginning of 2010 (2009 average: 14 months).
Moody’s considers that this increase is mainly attributable to the forbearance tools introduced by Kensington in response to the changing economic climate and regulatory environment and the various initiatives implemented by the government since the start of the financial crisis to ensure that all the solutions have been considered before beginning the foreclosure process.
Moody’s views positively the standardisation and automation of management information from Kensington’s third parties, as it ensures that iinformation is comparable and has also enhanced the overall monitoring and control framework. The work has been completed for its asset managers and is under way for its solicitors.
As of February 2010, the 90+ delinquency rate as a percentage of the current balance was 31.15%, 32.69% and 29.27% for RMS, MPS and KMS, respectively, which is 62%, 70% and 52% higher than the UK non-conforming index (19.22%). Cumulative losses as a percentage of the original pool balance were 1.86%, 3.31% and 2.95%, which is 22%, 118% and 94% higher than the UK non-conforming index 1.52%.
Kensington’s special servicing infrastructure has changed significantly since Moody’s prior review in February 2008. During this period, the department has grown from nine to 43 staff, mainly as a result of the establishment of the direct special servicing team.
A new head of department and two direct reports were externally recruited to support the growth. The vast majority of the staff have prior work experience in financial services gained as a collector, underwriter, mortgage sale or field agent.