S&P Seeks Comment on RMBS Loan-Mod Rules

Standard & Poor's Ratings Services is requesting comments on its proposed guidelines on the loan modification practices of residential mortgage loan servicers.S&P is also seeking comment on the manner of reimbursement of capitalized loan amounts in U.S. residential mortgage-backed securities. "The framework outlined in the proposal provides the market with a transparent, consistent, and fundamentally sound way of assessing loan modification and capitalization reimbursement amount risks in U.S. RMBS transactions," S&P said. The rating agency noted that loans can be modified by extending the amortization terms, adding balloon payments, decreasing the mortgage rates, and forgiving principal or interest payments, among other things. "The proposed guideline changes reflect the potential increase in the use of loan modifications as a loss mitigation strategy in the mortgage loan servicing industry and encourage sound loan modifications," the rating agency said. The guidelines can be found on S&P's website at http://www.standardandpoors.com.