Moody’s Changes Residential Mortgage Servicer Rating Methodology

Moody's Investors Service has updated its Servicer Quality Assessment rules by incorporating key enhancements that are based on loan-level performance data and expanded reporting from securitization trusts.

Moody’s said it has implemented “a formalized weighting system” for the following performance categories: collections, loss mitigation foreclosure timeline management, loan administration and servicer stability.

The new methodology also includes data on redefaults of modified loans—often referred to as recidivism—into the servicing quality performance analysis.

According to Moody’s vice president and senior credit officer, William Fricke, the decision to use monthly data from the trusts when analyzing a servicer’s collections roll rates, cure rates and foreclosure process effectiveness is based on it being more timely and because trust data also allow “to incorporate the performance of servicers that we do not assess."

The updated methodology for assessing the ability of U.S. servicers of securitized residential mortgage loans to prevent defaults and maximize recoveries, replaces Moody’s Approach to Rating Residential Mortgage Servicers, published on Jan. 19, 2001.

It pertains to servicers of prime loans, subprime loans, alt-A loans, second-lien loans (including home improvement and closed-end second-lien loans, and home equity lines of credit), high loan-to-value loans and manufactured housing loans.