Aurora Loan Services LLC had its servicer ratings cut as a result of deteriorating performance and an uncertain future. Further downgrades could be ahead.
Aurora’s primary servicer rating for prime mortgages was downgraded to SQ4+ by Moody’s Investors Service. The prior rating was SQ3-.
Moody’s highest possible rating is SQ1+, while the worst possible rating is SQ5-.
The ratings agency also lowered Aurora’s primary servicer rating for subprime loans to SQ4 from SQ4+.
In addition, the master servicer quality rating was cut to SQ4+ from SQ3+.
“Uncertainty over the ultimate outcome for the Aurora servicing platform, as well as a deterioration in the performance metrics as of December 2009, mainly drove the downgrades,” New York-based Moody’s explained.
Aurora Loan Services and parent Aurora Bank are subsidiaries of bankrupt Lehman Brothers Holding Inc. The U.S. Bankrupcty Court approved a settlement that includes the contribution of a large pool of servicing rights and cash to Aurora and Aurora Bank in order to maintain the required level of capital.
After the settlement is approved by the Office of Thrift Supervision, Lehman will have 18 months to sell Aurora Bank.
The servicer ratings will stay on review for another possible downgrade amid additional concerns about possible irregularities in Aurora’s foreclosure affidavit process.
Aurora serviced $86 billion in mortgages as of June, according to Moody’s.
Aurora’s master servicing portfolio reportedly stood at $147 billion as of March.
