Nonagency MBS Challenging Anti-Foreclosure Efforts.(News)

Byline: Bonnie Sinnock

New York-Some progress has been made when it comes to mitigating mortgage losses and helping keep distressed low- to moderate-income borrowers in their homes, but more needs to be done - particularly when it comes to those with loans that are part of private-label securitizations, according to Marietta Rodriguez, director of national homeownership programs at NeighborWorks America.

The "delineated paths" for refinancing or modifying government and GSE loans have been somewhat helpful, she said in an interview here. But the path for similar efforts designed to stop foreclosures on loans collateralizing privately held securities remains largely "unclear," Ms. Rodriguez added, noting this is an issue that still needs to be addressed.

Like other market participants, NeighborWorks has found legal complexities and related conflicting investor interests make resolving nonagency securitized loans tough, but Ms. Rodriguez said this doesn't mean the securitization process as a whole should be "thrown under the bus."

The securitization tool is critical in terms of bringing capital into the market, she said. But capital markets might need to participate in the mortgage industry in more healthy ways going forward, Ms. Rodriguez said. Examples of this might include more transparent disclosures or other measures that give investors more confidence upfront in the loss mitigation remedies built into loan securitizations.

The American Securitization Forum - which has been active in trying to restore investor confidence in the MBS market through the standardized market guidelines it helps its membership set - as well government officials, have been trying to help tackle this problem. One of the key points in these discussions has been servicers' need for some kind of a legal "safe harbor" when modifying loans. Otherwise investors who believe loss mitigation efforts are not adhering to contracts can sue servicers for breach of contract.

In addition to the complications posed by private-label MBS, challenges NeighborWorks has faced in trying to fulfill its high-profile goal of rescuing borrowers and keeping them in homes has been the proliferation of rescue scams, some of which have even appropriated NeighborWorks' name in an effort to identify distressed borrowers who might key it into a search engine, she said.