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Servicing / The Ticker

Moody's updates ratings methodology for servicers

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Moody's Investors Service (MCO) announced changes to the way it assesses the effectiveness of U.S. mortgage servicers on Tuesday.

The updated formula will enhance Moody's servicing assessments by studying roll rates, cure rates and foreclosure process data culled monthly from securitized trusts. The new information will augment loan-level performance data that is routinely pulled from servicer portfolios.

Overall, Moody's will be evaluating servicers on collections, loss mitigation, foreclosure timeline management and loan administration practices.

Moody's released a new report titled "Moody's Methodology for Assessing RMBS Servicer Quality." The guidelines replace the company's previous methodology, which was published back in January 2001.

The big change is the pulling of data from trusts containing loans.

"The trust data is more timely and it also allows us to incorporate the performance of servicers that we do not assess," said Moody's Vice President and Senior Credit Officer William Fricke.

The new methodology includes a weighted system for loan performance categories such as collections, loss mitigation timeline management, loan administration and servicer stability.

The new system also includes re-default information on loans that fall late after receiving a loan modification.

The rating methodology covers servicers of prime loans, subprime loans, Alt-A, second-lien loans, high loan-to-value ratio loans and manufactured home loans.

"The SQ assessments address the incremental impact of the servicer on the performance of the loans, not the underlying credit quality of the loans, which is generally beyond the servicer's control," said Moody's.

The reviews used to be called 'servicer quality ratings,' but Moody's is now using the term assessment to describe the overall evaluation process.

Click here to access the full report.


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