Fitch: Specially serviced mortgages returning current sans financial reports

Specially serviced home loans are retuning to performing status without reporting current financial data, leaving investors in the dark about the property’s performance, according to Fitch Ratings. Analysts reviewed loans sent back to the master servicer in July and August and found about 60% classified as current on debt-service payments haven’t filed appropriate financial data for 2010. “That special servicers are not collecting operating statements on specially serviced loans and reporting them through the master servicer is disconcerting,” according to Fitch Senior Director Adam Fox. Special servicers take control of some severely delinquent loans and help the borrower through the process, returning the loan to the master servicer after a modification. Fitch said it has asked special servicers several times to submit financial data for a sample of recently corrected loans that didn’t report results. When a borrower doesn’t provide statements “it is usually an indication that the property may be in distress,” Fitch said. While the financial statements aren’t always an accurate representation of the property, Fitch said it needs the data to assess and rate loan and property performance. When financial information is not reported, Fitch Ratings “applies more conservative modeling assumptions, generally resulting in increased default and loss assumptions,” according to the ratings agency, which plans to further investigate the matter. Earlier this month, the Office of the Comptroller of the Currency reported mortgage modifications completed through private bank programs redefaulted at a rate nearly twice as high as federal Home Affordable Modification Program. Write to Jason Philyaw.