Alleged fraud in Bayview Financial‘s mortgage loan data may have limited impact on its outstanding securitizations. The Coral Gables, Fla., real estate investment and mortgage finance company recently announced a senior salesperson had altered credit data on some residential mortgage loans included in securitizations. However, investors seem to have taken the announcement in stride, noted Michael Youngblood, head of asset-backed securities research at Friedman Billings Ramsey. “We live in a fallen world and evil is a fact of life,” he said. He said investor alarms had not been raised as the problem seemed to have been limited to one person.
In March Bayview found a senior salesman altered credit data on mortgage loans for years to increase his commissions. The changes include increasing borrowers’ credit scores, changing property types and occupancy codes, as well as other changes. Only about $100 million of $3.3 billion of outstanding mortgage loans included in securitizations were affected, according to David Quint, president and coo. Quint said the company had already repurchased or made substitutions for $66 million of the affected loans. “The relationships we’ve cultivated with investors have really helped us,” he said, noting after conversations with more than 40 investors regarding the case no one had complained about the bonds’ trade execution. “The trading is really the best measure of investor sentiment,” he said.
Fitch Ratings said at first glance there seemed to be little or no immediate credit implications to the outstanding transactions. Spokesmen for both Moody’s Investors Service and Standard & Poor’s said the agencies were looking into whether the situation would have any ramifications on the deals they had rated.
The Securities and Exchange Commission has commenced an inquiry into the company and has requested documents and information relating to Bayview’s securitization business. John Nester, SEC spokesman, did not return a phone call by press time.