Higher Loss Severities on Foreclosures will Push Servicers to Short sales in 2011: Fitch
Borrowers average 19 months without making a payment before they are foreclosed upon, a record high, and Fitch projects this to increase to 25 months in 2011.
Palm Coast, FL – December 20, 2010
Loss severities are expected to increase between 5% and 10% on residential mortgage-backed securities in 2011 as loss mitigation costs and foreclosure expenses go up, according to Fitch Ratings. This, analysts said, will push servicers toward short sales.
The loss severity, or the percentage of principal lost when a loan is foreclosed, on prime mortgage loans is currently at 44%. This, according to Fitch, will increase to between 49% and 54% in 2011. For Alt-A loans, the current 59% loss severity should increase to between 64% and 69%.
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