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S&P Offers New Biannual Report on Mortgage Servicing Industry
By James Comtois
Standard & Poor's has launched the biannual Servicer Evaluation Spotlight Report, offering aggregated servicer performance data, including a full range of servicer metrics. The new report provides a detailed view of the servicing industry and encompasses all mortgage market segments, including subprime and alt-A loans.
In its debut report, Standard & Poor's notes that the industry mean for the foreclosure cure rate with prime loans was 30% in the first half of 2007 compared to 32% in the first half of 2006. With subprime loans, the cure rate was 25% in the first half of 2007, compared to 22% in the first half of 2006. Standard & Poor's also charted the average number of case files that each bankruptcy counselor in the prime and subprime mortgage servicing sectors handles at a given time.
Additionally, according to the report, the number of case files per full-time employee decreased to June 2007 from June 2006. Standard & Poor's suggests this could be attributable to an increase in capacity and/or an increasing reliance on outsourcing these tasks to external vendors.
Standard & Poor's acknowledges that eviction proceedings can be time consuming and costly, adding delays and significant expense to the real estate owned marketing timeline. So, Standard & Poor's also collects data regarding the volume of REO properties that require eviction. The report indicates that more than 30% of all subprime REO properties required the commencement of eviction proceedings on an industrywide basis between June 2006 and June 2007.
Eviction timeframes vary from state to state and can significantly affect the cost of marketing an REO property. Servicers may offer a cash incentive to the borrower to vacate the premises. Known as "cash for keys," such incentives provide the borrower with a fresh start, allows the servicer to proceed with REO marketing in a more expeditious manner and provides savings to the investor.
The recently published inaugural Servicer Evaluations Spotlight Report details the loan administration performance of 91 U.S. residential mortgage servicers. The residential mortgage servicing industry data contained in the report were collected solely through Standard & Poor's servicer evaluation analytical methodology data collection process, which contains more than 4,000 fields of servicing data for each client. SEAM is the proprietary data collection and benchmarking methodology which S&P developed to collect analyze, benchmark and trend servicer performance data.
"The Servicer Evaluation Spotlight Report aggregates performance statistics across a range of relevant servicer functions, such as escrow administration, loss mitigation, default management and the management of adjustable-rate mortgage reset and loan modifications," said Michael Gutierrez, managing director and head of Standard & Poor's Structured Finance Servicer Evaluations group.
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