Reset-Linked Servicer Modifications Deemed Low

The average subprime loan servicer has only recently begun to make material loan modifications related to interest rate resets, and the modification activity remains low, according to a recent survey of mortgage servicers by Moody's Investors Service.The survey reviewed 16 subprime servicers with total servicing volume of approximately $950 billion, roughly 80% of the subprime servicing market. Moody's said the survey showed that most servicers had only modified about 1% of loans that underwent a reset in January, April, and July of 2007. It also found that the majority of large servicers surveyed continue to rely on passive letter-based contact with borrowers instead of more active methods such as telephone calls. "These trends can be a cause for some concern," said Nicolas Weill, chief credit officer in the Moody's Structured Finance Group. "Based on these survey results, the number of future loan modifications by subprime servicers on loans facing reset may be lower than needed to mitigate losses meaningfully." The rating agency can be found online at http://www.moodys.com.