Via BusinessWeek:
Fitch Ratings said Wednesday it’s asking mortgage servicers about their foreclosure practices in the wake of GMAC Mortgage LLC’s recent disclosure of procedural errors.
The agency believes that if more errors are found by other servicers, that could stall foreclosures in some states and increase losses related to residential mortgage-backed securities. That could prompt Fitch to downgrade ratings on servicers that are affected, the agency said.
“Any servicer with a significant portion of their portfolio in judicial foreclosure states will be either directly or indirectly impacted by the attention focused on this problem,” wrote Diane Pendley, managing director at Fitch.
The procedural errors involve affidavits verifying who owns the mortgage note. Fitch is reviewing each servicer’s internal process for executing foreclosure affidavits. If it finds the process is lacking, Fitch will consider lowering the servicer’s rating.
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