Global Mortgage
Structured Finance
SEAM Peer Group Benchmarking Study USA
Primary Credit Analyst Richard Koch New York (1) 212-438-2513 richard_koch@ standardandpoors.com Secondary Credit Analyst Michael Gutierrez New York (1) 212-438-2476 michael_gutierrez@ standardandpoors.com
Global Mortgage SEAM Peer Group Benchmarking Study Prepared Exclusively For Global Mortgage This proprietary SEAM Peer Group Benchmarking study has been prepared by Standard & Poor’s for exclusive use by Global Mortgage. The industry peer group data utilized in this study has been solely collected through Standard & Poor’s Servicer Evaluation Analytical Model (SEAM), a proprietary data collection and benchmarking model developed to collect, analyze, and benchmark industry and peer group servicer performance data. For purposes of industry comparisons, all data used in this study is derived from the period January 1, 2005 through June 30, 2005. The industry peer group used for data modeling in this study consists of residential non-prime (subprime) loan servicing portfolios with greater than 225,000 but not more than 325,000 loans serviced. The peer group for this study has been identified by Standard & Poor’s in the SEAM data collection process and as reported by Mortgage Servicing News in their Quarterly Data Report, 3rd Quarter, 2005. The servicing areas analyzed for purposes of this benchmarking study include staffing metrics, call center performance indicators, as well as collections-loss mitigation-foreclosure-REO performance metrics, pursuant to the client’s request.
January 2006
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TABLE OF CONTENTS
MANAGEMENT & ORGANIZATION METRICS: LSPE And Loan Servicing Staff FTE Count
3
Servicing Staff Turnover Rates
4
New Hire Training Metrics
5
Management Experience Levels & Tenure
6
LOAN ADMINISTRATION METRICS: Geographic Portfolio Concentration
7
Lockbox Processing Efficiencies
8
Lender Placed Insurance Rates
9
Lender Placed Insurance Rates
10
Non-Reimbursable Tax Penalties
11
CALL CENTER METRICS: Customer Service Performance
12
Customer Service Performance
13
DEFAULT MANAGEMENT METRICS: Welcome Call Contact Rate
14
Collection Call Center Metrics
15
DEFAULT MANAGEMENT METRICS:
2
Promise To Pay Success Rates
16
Roll Rate Migration Analysis
17
Forbearance Metrics
18
Foreclosure Performance Metrics
19
REO Performance Metrics
20
REO Performance Metrics
21
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management & organization metrics MANAGEMENT & ORGANIZATION METRICS LSPE AND LOAN SERVICING STAFF FTE COUNT
The chart below illustrates two metrics: Loans Serviced Per Servicing Employee (LSPE) and Loan Servicing FTE (Full Time Equivalent). Loans Serviced Per Servicing Employee is an efficiency measurement that represents a ratio of the number of employees dedicated to loan servicing compared Call the Center Metrics - Total Number FTE loan servicing portfolio. In the peer group with overall number of units in the comparison below, Global Mortgage has an LSPE of 461 while the peer group average is 452. Loan Servicing FTE is a measurement of those employees who are dedicated to a loan servicing function. Global Mortgage has 682 FTE dedicated to loan servicing functions, while the peer group, all of similar size and asset type, average 648 FTE dedicated to loan servicing functions.
Loans Serviced Per Servicing Employee/Loan Servicing FTE
800 700 600 500 400 300 200 100 0
Global Mortgage
PEER 1
PEER 2 LPSE
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PEER 3
PEER AVG
TOTAL FTE
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MANAGEMENT & ORGANIZATION METRICS SERVICING STAFF TURNOVER RATES
The chart below illustrates the overall turnover rate for both loan servicing management and loan servicing staff. Standard & Poor’s defines turnover as: All voluntary and involuntary turnover of staff and management. The turnover rate must also include all intra-organizational transfers (internal turnover) of personnel within the organization. Call Center Metrics - Total Number FTE As indicated below, the management turnover rate for Global Mortgage is an industry low three percent (3%), which outperforms their peer group average of six percent (6%) and is significantly better than SEAM industry comparisons. In addition, loan servicing staff turnover rate for Global Mortgage is a very low sixteen percent (16%), again outperforming their peer group average of twenty-two percent (22%). Global Mortgage’s sixteen percent (16%) staff turnover rate is also better than SEAM industry comparisons.
Turnover Rate (Jan-Dec 2005)
35% 30% 25% 20% 15% 10% 5% 0%
Global Mortgage Mgmnt
4
PEER 1 Staff
PEER 2
PEER 3
2 per. Mov. Avg. (Mgmnt)
PEER AVG 2 per. Mov. Avg. (Staff)
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B E N C H M A R K I N G
MANAGEMENT & ORGANIZATION METRICS
R E P O R T
NEW HIRE TRAINING METRICS
Standard & Poor’s views training as an integral aspect of the overall servicer ranking. Introductory or “new hire” training and orientation is especially critical in areas such as customer service and loan collections where an employee must be trained and educated in many aspects of regulatory compliance such as RESPA and FDCPA as well as how to efficiently and effectively use loan servicing technology. A solid loan servicing foundation in any organization will result in a knowlCall Center - Totalworkforce Number FTE edgeable andMetrics resourceful that will apply loan servicing policies and practices in a correct and consistent manner. As indicated in the chart below, Global Mortgage provides sixty-four (64) hours of introductory classroom training for new loan collectors. While this result compares favorably overall to industry averages as measured by SEAM, it is below the peer group average of sixty-seven (67) hours. With respect to customer service training, Global Mortgage provides one hundred and four (104) hours of classroom instruction and training which outperforms the peer group average of eighty-seven (87) hours and also outperforms industry averages as measured by SEAM.
Total Hours Entry-Level Training (Customer Service/Collections)
150
100
50
0
Global Mortgage
PEER 1
PEER 2
64
80
104
80
Collections Customer Service
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PEER 3
PEER AVG
40
80
67
60
120
87
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MANAGEMENT & ORGANIZATION METRICS
R E P O R T
MANAGEMENT EXPERIENCE LEVELS & TENURE
A key aspect of the Standard & Poor’s servicer review process is the relevant industry experience that senior and middle management bring to the loan servicing operation. Ideally, the more depth and breadth of experience that a management team brings to the organization often equates to the ultimate success of that organization’s business vision and their flexibility to change with market conditions. In addition, Standard & Poor’s also looks at the senior and middle management team’s tenure with their current organization. Present company tenure may indicate numerous factors such as that organization’s short-term and long-term operating stability, success of continuing education programs for management, promotional opportunities within the organization, and the financial compensation afforded to management. Based on the chart below, Global Mortgage’s senior management team has twentyfive (25) years of relevant industry experience which is substantially higher than their peer group average of sixteen (16) years and represents the upper tier of their industry as reflected in our SEAM database. Company tenure is also quite solid at seven (7) years, also outperforming their peer group average of four (4) years. The results for middle management at Global Mortgage are also quite good with thirteen (13) years of industry experience and five (5) years of company tenure, outperforming or matching their peer group averages of nine (9) years and five (5) years, respectively.
Senior & Middle Management Industry Experience & Company Tenure (#Yrs.)
25 20 15 10 5 0
Global Mortgage
Company Tenure Middle Mgmnt. (# Yrs.) Company Tenure Sr. Mgmnt (# Yrs.)
6
5 13 7 25
PEER 1
PEER 2
PEER 3
3 9 3 17
8 12 6 19
4 7 4 12
PEER AVG 5 9 4 16
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loan administration metrics LOAN ADMINISTRATION METRICS
G E O G R A P H I C P O R T F O L I O C O N C E N T R AT I O N
Standard & Poor’s reviews each servicer’s loan portfolio geographic concentration by number of loan units. A geographic concentration heavily situated in a particular state or region may present a risk of loss in the event of a regional economic downturn. The United States map below illustrates the geographic portfolio concentration of Global Mortgage and its peer group. The chart below shows the top three states, in terms of loan portfolio concentration (# units) for each servicer in the peer group. While each servicer has a substantial concentration of loans in their respective geographic region, Global Mortgage, as reflected in the states shaded in green, has a 33% portfolio concentration on the eastern seaboard, 67% of their loan portfolio is distributed in other states resulting in a substantial level of insulation from regional economic downturns. Peer group 1, indicated by the states shaded in yellow, and peer group 2, reflected by the states shaded in red, have the highest levels of geographic concentration. Peer group 2 has 90% of their loan servicing portfolio situated closely in the south and southwest (GA, LA, and TX) with only 10% of their portfolio spread among other states. Peer group 1 has the highest level of concentration with the entire loan servicing portfolio (100%) situated in the southwest and western Unites States.
Geographic Portfolio Concentration
OR 8%
NY 35%
CA 74%
OH 14% KY 11%
NC 57%
AZ 18% TX 55%
LA 22%
PA 18%
GA 13%
FL 14%
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LOAN ADMINISTRATION METRICS
B E N C H M A R K I N G
R E P O R T
LOCKBOX PROCESSING EFFICIENCIES
Standard & Poor’s reviews the payment processing channels utilized by loan servicers as well as the efficiencies realized by utilizing an external lockbox vendor. The chart below illustrates the lockbox processing rate, lockbox capture rate, and lastly, the lockbox error or “reject” rate, as it is also known. The degree to which a lockbox vendor is effective may also be impacted by certain external factors such as the key performance indicators inherent in the servicer-vendor agreement as well as the level of oversight and management that the servicer brings to the relationship. The first metric, the lockbox processing rate, is defined by Standard & Poor’s as: (% Annualized Of Incoming Payments Processed By Lockbox) - The percentage of all incoming monthly payments that are processed by the lockbox vendor. Lockbox Processing Efficiencies
100% 75% 50% 25% 0% Global Mortgage Lockbox Processing Lockbox Capture Lockbox Error/Reject
78.00% 98.00% 2.00%
PEER 1
PEER 2
PEER 3
PEER AVG
85.00% 97.00% 3.00%
82.00% 94.00% 6.00%
56.00% 95.00% 5.00%
74.30% 95.30% 4.60%
The lockbox processing rate for Global Mortgage at 78%, compares favorably with their peer group and exceeds the peer group average of 74.30%. The second metric, the lockbox capture rate, is defined by Standard & Poor’s as: (% Annualized) – The percentage of all payments on a monthly basis received by the lockbox vendor that are ultimately processed by the lockbox vendor. The lockbox capture rate for Global Mortgage at 98% compares favorably to their peer group average of 95.30%. The third metric, the lockbox error or “reject” rate, is defined by Standard & Poor’s as: The percentage (%) of all monthly payments that are initially rejected by the lockbox vendor upon receipt and forwarded to the servicer for further processing or research. The lockbox error rate for Global Mortgage is 2%, which is superior to the peer group average of 4.60% and compares favorably to industry averages as measured by SEAM.
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LOAN ADMINISTRATION METRICS
B E N C H M A R K I N G
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L E N D E R P L A C E D I N S U R A N C E R AT E S
Standard & Poor’s performs an in-depth analysis of a servicer’s handling of lender placed insurance, both hazard and flood. A critical aspect of this analysis is a servicer’s lender placed insurance rate, defined by Standard & Poor’s as: Lender placed hazard insurance coverage is defined as any account where a binder of insurance has been issued by the insurance vendor or its agents. The lender placed insurance rate is a reflection of a servicer’s internal processes that track and monitor evidence of continuing insurance coverage that protects the mortgaged asset. The servicer’s ability to manage various aspects of the outsourcing relationship with the insurance provider is arguably reflected in the lender insurance placement rate, cancellation rate, and renewal rate. The 6.25% hazard insurance placement rate compares very favorably to the peer group average of 12.50% as well as industry averages as measured by SEAM. Similarly, the .80% flood insurance placement rate compares favorably to the peer group average of 1.23, as well as industry averages as measured by SEAM. The cancellation rates for hazard and flood insurance may be considered an indicator of the internal control processes and tracking methodologies that the servicer has in place to minimize the regulatory, legal and headline risk that can come from abusive or inefficient lender placed insurance practices. The lender placed insurance cancellation rate is defined by Standard & Poor’s as: The cancellation rate is defined as the average monthly rate (annualized) of all lender placed insurance cancellations as a percentage of all lender placed flood insurance policies in force in the servicer’s portfolio during the semi-annual period noted in SEAM.
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LOAN ADMINISTRATION METRICS
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L E N D E R P L A C E D I N S U R A N C E R AT E S
The hazard and flood insurance cancellation rates for Global Mortgage are 3% and 7%, respectively, which compare favorably with their peer group averages of 18.30% and 6.33%, respectively.
LPI Hazard & Flood Insurance Placement, Cancellation & Renewal Rates
25% 20% 15% 10% 5% 0% Global Mortgage PEER 1 PEER 2 PEER 3 PEER AVG
LPI Hazard Rate
LPI Hazard Cancellation
LPI Flood Rate
LPI Flood Cancellation Rate
LPI Hazard Renewal
LPI Flood Renewal Rate
6.25% 8.45% 12.10% 5.50% 8.68%
3.00% 13.00% 24.00% 18.00% 18.30%
0.80% 1.25% 0.75% 1.70% 1.23%
7.00% 3.00% 5.00% 11.00% 6.33%
4.90% 5.60% 11.00% 8.45% 8.35%
12.50% 17.00% 14.00% 12.75% 14.58%
Standard & Poor’s also examines the hazard and flood insurance annual renewal rates as further indication that the lender placed insurance policies have not been placed in error and that the risk of erroneous lender placed insurance policies has been minimized. The hazard and flood insurance annual renewal rates for Global Mortgage at 4.90% and 12.50%, respectively, outperform their peer group averages of 8.35% and 14.58%, respectively.
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LOAN ADMINISTRATION METRICS
B E N C H M A R K I N G
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NON-REIMBURSABLE REAL ESTATE TAX PENALTIES
Standard & Poor’s analyzes the non-reimbursable real estate tax penalties that are incurred by servicers. Non-reimbursable real estate tax penalties may be an indicator of inefficiencies in the new loan process from originations and/or boarding to loan servicing set-up. It may also be indicative of data integrity controls, ineffective management oversight, or inadequate oversight of vendor processes. Non-reimbursable real estate tax penalties are defined and calculated by Standard & Poor’s as: This calculation should be based on the servicer's total portfolio of first mortgage loans and should be expressed as cents per loan-annualized. 'Non-reimbursable' is defined as penalties incurred by virtue of circumstances outside of the servicer's control and should not include penalties that may be reimbursed by a third party service provider.
Non-Reimbursable Real Estate Tax Penalties
$1.40
$1.20
$1.20 $1.00 $0.73
$0.73
$0.80 $0.60 $0.24 $0.40
$0.18
$0.20 $0.00
Global Mortgage
PEER 1
PEER 2
PEER 3
PEER AVG
Non-Reimbursable Real Estate Tax Penalties
The non-reimbursable real estate tax penalties for Global Mortgage are low at eighteen cents ($0.18) per loan, which compares favorably to their peer group average of seventy-three cents ($0.73).
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call center metrics CALL CENTER METRICS
CUSTOMER SERVICE PERFORMANCE
Standard & Poor’s measures call center performance based upon a wide variety of performance metrics. Perhaps the most prominent of these metrics are the average speed to answer, average talk time, and average wrap time. Standard & Poor’s defines average speed to answer as: (Seconds Annualized) - The average speed of answer (ASA) is calculated by the automated call distributor (ACD) as soon as the call is cued and is waiting to be answered. If the servicer's ACD is using overflow, the ASA timing should begin as soon as the call has cued, not at the time the call has overflowed.
Call Center Metrics (Seconds)
80
400
70 300
60 50 40
200
30 20
100
10 0
Global Mortgage
Average Speed To Answer 46 Average Talk Time 256 Average Wrap Time 42 (right scale)
PEER 1
PEER 2
PEER 3
PEER AVG
82 310 65
55 245 36
120 345 70
85.7 300 57
0
The average speed to answer for Global Mortgage is a highly efficient 46 seconds, which compares quite favorably to the peer group’s 85.7 second average speed to answer and is highly effective based on SEAM industry performance indicators. In addition, the average talk time as reported by Global Mortgage at 256 seconds outperforms the peer group average of 300 seconds. Average talk time is defined by Standard & Poor’s as: The total time that callers are connected with agents. This calculation should be provided as an overall average during the past six months, annualized, in seconds per agent. Lastly, average wrap time, as reported by Global Mortgage, is 42 seconds, which outperforms the peer group average of 57 seconds. Average wrap time is defined by Standard & Poor’s as: (Also known as 'after-call work') - Wrap time is defined as time (in seconds) that the agent is unavailable to receive another inbound call while in this mode.
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CALL CENTER METRICS
B E N C H M A R K I N G
R E P O R T
CUSTOMER SERVICE PERFORMANCE
Among the other call center performance metrics that Standard & Poor’s tabulates is the VRU (voice response unit), abandonment rate, and first call resolution rate. The VRU capture rate is defined by Standard & Poor’s as: Voice response unit capture rate is defined as the percentage of inbound calls routed through the VRU (a/k/a Interactive Voice Response Unit) that are successfully completed by the VRU technology without the need for further call routing. The VRU capture rate for Global Mortgage is 35% which is competitive with its peer group average of 35.30%. The abandonment rate for Global Mortgage is 4.80% which is significantly better than its peer group average of 7.37%, although there is room for improvement when measured against industry performance benchmarks as reported in SEAM. Standard and Poor’s defines the abandonment rate as: All calls abandoned divided by all calls abandoned + all calls answered. Call Center Metrics (% Annualized) 100% 75%
50%
25%
0% VRU (IVR) Capture Rate AbandonmentRate First Resolution Rate
Global Mortgage
PEER 1
PEER 2
PEER 3
PEER AVG
35.00%
27.00%
4.80%
6.00%
32.00%
47.00%
35.30%
5.10%
11.00%
7.37%
78.00%
82.00%
65.00%
88.00%
78.33%
Lastly, Standard & Poor’s analyzes call center first call resolution. While this metric is an indicator of overall customer satisfaction, it is also provides insight into the level of training of call center employees, familiarity of training, and efficiency of internal processes. First call resolution is defined by Standard & Poor’s as: The percentage (%) of all calls answered that do not require any further contact to resolve the customer's initial inquiry. Resolution may be defined as: 1) agent does not need to transfer the call; 2) customer states, when asked, that the inquiry has been resolved; 3) agent has no follow-up work to perform; 4) a hard coded call tracking code used by the servicer to denote a 'call resolution has been assigned to the account. The first call resolution rate as reported by Global Mortgage is competitive with its peer group average of 78.33%. www.standardandpoors.com
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default management metrics DEFAULT MANAGEMENT METRICS
W E L C O M E C A L L C O N TA C T R AT E
An important aspect of non-prime servicing are welcome calls made by the servicer to new borrowers. The welcome call establishes contact, reinforces the loan terms, payment due dates, and validates the borrower’s information. While most servicers in the non-prime sector routinely perform welcome calls, Standard & Poor’s collects the ‘contact’ or ‘hit’ rate. This is defined by Standard & Poor’s as follows: The welcome call contact rate is defined as the percentage (%) of all outbound calls attempted where a successful contact with the borrower(s) was made. This calculation should only include conversations with the borrower(s)/obligor(s) and not the percentage (%) or number of attempts or left messages. As illustrated by the chart below, Global Mortgage, at 96%, achieves superior results when compared to the welcome call contact rate of its peer group at 71.30%.
Welcome Call Contact Rate 100%
96.00%
78.00%
80% 71.30%
74.00% 60%
62.00%
40% 20% 0%
Global Mortgage
PEER 1
PEER 2
PEER 3
PEER AVG
Welcome Call Contact Rate
Loan servicing organizations allocate substantial financial and human resources in an effort to contact delinquent borrowers and bring those delinquent accounts to performing status. Standard & Poor’s analyzes the overall effectiveness of these outbound calling campaigns through a variety of metrics; however, an analysis of how effectively a servicer can respond to inbound collection call traffic is also important to assess the ease with which delinquent borrowers can return calls and make payments or payment arrangements. A high inbound call abandonment rate or even a blockage rate, can frustrate borrowers, increases the flow of loans into delinquency buckets and result in regulatory, legal and headline risk.
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DEFAULT MANAGEMENT METRICS
B E N C H M A R K I N G
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COLLECTION CALL CENTER METRICS
Collection Call Center Metrics
125
14.00% 12.00%
100
10.00% 75
8.00% 6.00%
50
4.00% 25 0
2.00% Global Mortgage
PEER 1
ASA (Seconds)
PEER 2
PEER 3
PEER AVG
0.00%
Abandonment Rate (%)
As illustrated in the chart above, Global Mortgage reported a 70 second average speed to answer which outperforms the peer group average of 84.3 seconds. Standard & Poor’s criteria suggests that a highly effective speed to answer for inbound collection call centers should be below 60 seconds. The average speed to answer for inbound collection calls is defined by Standard & Poor’s as: The inbound collection call average speed of answer (ASA) is calculated by the automated call distributor (ACD) as soon as the call is cued and is waiting to be answered. If the servicer's ACD is using overflow, the ASA timing should begin as soon as the call has cued, not at the time the call has overflowed. Similarly, the abandonment rate of inbound call traffic into the collections cue is analyzed. The abandonment rate is defined by Standard & Poor’s as: All calls abandoned divided by all calls abandoned + all calls answered. The call abandonment rate as reported by Global Mortgage is 9.80%, which does not compare favorably to the peer group average of 7.95% and should be improved. Standard & Poor’s criteria suggests that an acceptable call abandonment rate should be below 3%. Another key area of performance benchmarking within a collection call center is measuring collector performance in the successful completion of a promise to pay. The promise to pay success or ‘completion’ rate, is an indicator of how well trained the collection staff is in negotiation skills and identifying a borrower’s willingness and ability to pay. The chart below illustrates promise to pay success rates in the 30+ day and 60+ day delinquency buckets while also measuring the average promise to pay agreements secured per hour, per collector.
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default management metrics DEFAULT MANAGEMENT METRICS
P R O M I S E T O PAY S U C C E S S R AT E S
Promise to Pay Success Rates
90.00%
90.00% 85.00%
80.00% 80.00% 75.00% 70.00% 70.00% 60.00%
Global Mortgage
PEER 1
PEER 2
PEER 3
PEER AVG
30+ Days
80.92%
82.34%
78.45%
77.60%
79.46%
60+ Days
77.64%
75.40%
72.80%
68.90%
72.37%
Dialer Hour
85.50%
83.72%
79.23%
72.80%
78.58%
65.00%
The promise to pay success rate as defined by Standard & Poor’s is: % promises kept vs. promises made Global Mortgage reported promise to pay success rates of 80.92% and 77.64% in the 30+ and 60+ day delinquency buckets, respectively. These results compare favorably to the peer group averages of 79.46% and 72.37% in the 30+ and 60+ day delinquency buckets, respectively. With respect to the promise to pay per dialer hour ratio, Global Mortgage reported 85.50% which is superior to the peer group average of 78.58%. The promise to pay per dialer hour ratio is defined as: (Promises Confirmed Per Dialer Hour) – Defined as the percentage (%) of overall promises to pay confirmed per dialer hour of outbound call center activity (% annualized). Standard & Poor’s also performs roll rate migration analysis to assess the effectiveness of the overall collection effort. As the chart below illustrates, Standard & Poor’s reviews the flow of delinquent accounts from the 90+, 60+, and 30+ day delinquency buckets back to a performing or ‘current’ status. More specifically, roll rate migration is defined by Standard & Poor’s as: Roll rate migration from the delinquency buckets specified in the SEAM data field is defined as the percentage (%) of all accounts delinquent in the specified delinquency bucket (i.e., 30-59, 60-89, 90+ days) that roll from this category to current status within a one month cycle (annualized). 16
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DEFAULT MANAGEMENT METRICS
B E N C H M A R K I N G
R E P O R T
R O L L R AT E M I G R AT I O N A N A LY S I S
Roll Rate Migration From Designated Bucket To Current Status 40.00% 30.00%
20.00%
10.00%
0.00%
Global Mortgage
PEER 1
PEER 2
PEER 3
PEER AVG
30-59 Day
33.90%
27.65%
24.56%
31.20%
27.80%
60-89 Day
13.59%
15.10%
14.65%
17.45%
15.73%
90+ Days
3.69%
2.85%
2.25%
3.26%
2.79%
Global Mortgage reported roll rate migration results of 33.90%, 13.59%, and 3.69% in the 30+, 60+ and 90+ day delinquency categories, respectively. These results compare favorably with the peer group averages of 27.80%, 15.73%, and 2.79% in the 30+, 60+ and 90+ day delinquency categories, respectively. In the loss mitigation area, servicing organizations have an opportunity to use various loss mitigation strategies such as forbearance plans, deed-in-lieu, short sale, etc. to bring delinquent accounts to a performing or satisfied status and minimize loss severity. Among the many performance benchmarks that are collected by Standard & Poor’s in this area, the success of forbearance plans, which are often the most utilized loss mitigation strategy by servicers, are closely analyzed. The break rate of forbearance plans is analyzed during the initial six month cycle of a forbearance plan. The break rate is defined by Standard & Poor’s as: A formal written forbearance plan that becomes delinquent during the specified cycle as indicated in the SEAM questionnaire data field. The break rate represents the percentage (%) of overall active forbearance plans during the most recent six (6) month period as specified in the SEAM questionnaire that failed during the delinquency bucket/cycle indicated in the SEAM data field. The forbearance break rate is an indicator of the veracity of the initial repayment plan as well as providing insight into the servicer’s methodologies and training for identifying and qualifying potential loss mitigation candidates.
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DEFAULT MANAGEMENT METRICS
B E N C H M A R K I N G
R E P O R T
FORBEARANCE METRICS
As indicated in the chart below, the forbearance break rates in each of the six delinquency categories as reported by Global Mortgage outperform the peer group average in every category.
Forbearance Metrics: Break Rates, Cure Rate & Recidivism Rate 80.00% 60.00% 40.00% 20.00% 0.00%
Similarly, Standard & Poor’s collects additional data such as the overall cure rate of all forbearance plans to gauge what percentage of all forbearance plans are ultimately successful. Specifically, the forbearance cure rate is defined by Standard & Poor’s as: The percentage (%) of loans in foreclosure that were successfully cured ('cure' may include a completed forbearance plan, full payment of all arrearages, executed deed-in-lieu, completed short sale/short payoff, etc.). (Foreclosure is defined as the point in time that the servicer refers the file to legal counsel with instruction to commence foreclosure proceedings.) The forbearance cure rate, as reported by Global Mortgage, is 66.70%, which substantially outperforms the peer group average of 46.52% and also compares favorably with industry benchmarks as measured by SEAM. Lastly, the recidivism rate is tabulated to determine how many successful forbearance plans ultimately failed six months after they cured. A high recidivism rate may indicate that a different loss mitigation approach of a long-term nature or solution may have been more appropriate for the borrower. The forbearance recidivism rate is defined by Standard & Poor’s as follows: The recidivism rate is defined as the rate (%) (annualized) of formal forbearance plans that successfully completed per agreement but subsequently redefaulted within six (6) months of curing. A 'redefault' is defined as a 30-59 day delinquency.
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Global Mortgage reported a forbearance recidivism rate of 10.61% which compares very favorably to the peer group average of 28.57% as well as surpassing the industry average as reported in SEAM. DEFAULT MANAGEMENT METRICS
FORECLOSURE PERFORMANCE METRICS
While Standard & Poor’s concurs with accepted industry practice that loss mitigation should continue unabated on a dual path with other collection efforts, foreclosure is sometimes inevitable. Foreclosure timeline compliance is an essential benchmark to measure a servicer’s internal processes as well as the effective management of outside vendors. Foreclosure timeline compliance is defined by Standard & Poor’s as: Standard is defined as the 'average days to foreclose' within each state as defined by Fannie Mae, FreddieMac, state statute, or whichever designated benchmark or combination of benchmarks the servicer is utilizing. Foreclosure Performance Metrics 100.00% 80.00% 60.00% 40.00% 20.00% 0.00%
Global Mortgage
PEER 1
PEER 2
PEER 3
PEER AVG
Completion To Standard
96.77%
98.75%
94.65%
88.00%
93.80%
Foreclosure Cure Rate
11.61%
21.00%
36.75%
46.28%
34.68%
Foreclosure timeline compliance as reported by Global Mortgage is 96.77%, superior to the peer group average of 93.80%, indicating effective oversight of the foreclosure process. As previously stated, loss mitigation efforts should continue on a dual path during the foreclosure process. Accordingly, Standard & Poor’s collects the foreclosure cure rate as an indication of a servicer’s loss mitigation success in the late stages of delinquency. This data is balanced with an analysis of numerous other factors including roll rate migration patterns and promise to pay success rates to ultimately determine if a loss mitigation solution could have been successfully negotiated earlier in the loan delinquency cycle. Global Mortgage reported a foreclosure cure rate of 11.61%, which is substantially lower than the peer group average of 34.68%.
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DEFAULT MANAGEMENT METRICS
B E N C H M A R K I N G
R E P O R T
REO PERFORMANCE METRICS
A final but yet integral aspect of managing loss severity is the REO (Real Estate Owned) process. Although there are many aspects of measuring REO management effectiveness, the chart below reflects some of the more commonly used performance metrics.
REO Performance Metrics (# Days)
600 500 400 300 200 100 0
Global Mortgage Eviction Time 85 Turnaround Time 196 Marketing Time 122 Oldest Asset Held 386
PEER 1 96 212 164 512
PEER 2 110 184 156 213
PEER 3 98 225 186 412
PEER AVG 101.3 207 168.7 379
As the chart illustrates, Global Mortgage reported an average eviction time of 85 days which is superior to the peer group average of 101.3 days. In addition, the turnaround time and overall marketing time as reported by Global Mortgage at 196 days and 122 days, respectively, outperforms the peer group average of 207 days and 168.7 days, respectively. The REO inventory turnaround time is defined by Standard & Poor’s as: The number of days, average (annualized), that an REO asset is carried in inventory. The REO marketing time is defined by Standard & Poor’s as: The number of days from post-eviction status to real estate owned (REO) property closing date.
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DEFAULT MANAGEMENT METRICS
B E N C H M A R K I N G
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REO PERFORMANCE METRICS
The chart below illustrates REO disposition metrics that are reflective of a servicer’s ability to obtain accurate valuations, develop strategic relationships with brokers, effectively review and manage marketing plans and efficiently execute the overall asset disposition process to minimize the ultimate loss severity.
REO Disposition Metrics 100.00% 80.00% 60.00% 40.00% 20.00% 0.00%
PEER 2
PEER 3
15.00%
18.00%
22.00%
Gross v Market Value 96.14%
94.65%
91.00%
92.30%
92.65%
Net v Market Value
86.43%
84.70%
83.00%
84.71%
Inventory Turn Rate
Global Mortgage 25.00%
88.75%
PEER 1
PEER AVG 18.33%
The inventory turn rate, as reported by Global Mortgage, is 25%, outperforming the peer group average of 18.33%. The inventory turn rate is defined by Standard & Poor’s as: Those REO assets that complete a successful closing as a percentage of the total monthly REO portfolio inventory (six month history annualized). Gross sales and net sales to market value are two additional performance benchmarks that reflect a servicer’s ability to obtain a maximum recovery at REO sale. Gross sales to market value and net sales to market value calculations are defined by Standard & Poor’s as follows: 1) Gross sales to market value - The overall average percentage of market value to gross sales price ratio (% Annualized) realized on your real estate owned (REO) inventory dispositions. 2) Net sales to market value – The overall average percentage of market value to net sales price ratio (% annualized) derived from real estate owned property dispositions. The 'net sales' price should be exclusive of all carrying costs, interest, fees, expenses, disposition costs, etc. and should only be based upon the 'net/net' of the REO property disposition Global Mortgage reported a gross sales to market value of 96.14% which outperforms the peer group average of 92.65%. The net sales to market value reported by Global Mortgage is 88.75%, which is superior to the peer group average of 84.71%, indicating solid management of the REO sales process.
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R E P O R T
Notes
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Notice to Subscribers Published by Standard & Poor’s, a Division of The McGraw-Hill Companies, Inc. Executive offices: 1221 Avenue of the Americas, New York, NY 10020. Editorial offices: 55 Water Street, New York, NY 10041. Subscriber services: (1) 212-438-7280. Copyright 2006 by The McGraw-Hill Companies, Inc. Reproduction in whole or in part prohibited except by permission. All rights reserved. Information has been obtained by Standard & Poor’s from sources believed to be reliable. However, because of the possibility of human or mechanical error by our sources, Standard & Poor’s or others, Standard & Poor’s does not guarantee the accuracy, adequacy, or completeness of any information and is not responsible for any errors or omissions or the result obtained from the use of such information. Ratings are statements of opinion, not statements of fact or recommendations to buy, hold, or sell any securities. Standard & Poor’s uses billing and contact data collected from subscribers for billing and order fulfillment purposes, and occasionally to inform subscribers about products or services from Standard & Poor’s, our parent, The McGraw-Hill Companies, and reputable third parties that may be of interest to them. All subscriber billing and contact data collected is stored in a secure database in the U.S. and access is limited to authorized persons. If you would prefer not to have your information used as outlined in this notice, if you wish to review your information for accuracy, or for more information on our privacy practices, please call us at (1) 212-438-7280 or write us at: [email protected] <mailto:[email protected]>. For more information about The McGraw-Hill Companies Privacy Policy please visit www.mcgraw-hill.com/privacy.html. Analytic services provided by Standard & Poor’s Ratings Services (“Ratings Services”) are the result of separate activities designed to preserve the independence and objectivity of ratings opinions. The credit ratings and observations contained herein are solely statements of opinion and not statements of fact or recommendations to purchase, hold, or sell any securities or make any other investment decisions. Accordingly, any user of the information contained herein should not rely on any credit rating or other opinion contained herein in making any investment decision. Ratings are based on information received by Ratings Services. Other divisions of Standard & Poor's may have information that is not available to Ratings Services. Standard & Poor’s has established policies and procedures to maintain the confidentiality of non-public information received during the ratings process. Ratings Services receives compensation for its ratings. Such compensation is normally paid either by the issuers of such securities or third parties participating in marketing the securities. While Standard & Poor’s reserves the right to disseminate the rating, it receives no payment for doing so, except for subscriptions to its publications. Additional information about our ratings fees is available at www.standardandpoors.com/usratingsfees. Permissions: To reprint, translate, or quote Standard & Poor’s publications, contact: Client Services, 55 Water Street, New York, NY 10041; (1) 212-438-9823; or by email to: [email protected].
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SEAM Peer Group Benchmarking Study USA
Primary Credit Analyst Richard Koch New York (1) 212-438-2513 richard_koch@ standardandpoors.com Secondary Credit Analyst Michael Gutierrez New York (1) 212-438-2476 michael_gutierrez@ standardandpoors.com
Global Mortgage SEAM Peer Group Benchmarking Study Prepared Exclusively For Global Mortgage This proprietary SEAM Peer Group Benchmarking study has been prepared by Standard & Poor’s for exclusive use by Global Mortgage. The industry peer group data utilized in this study has been solely collected through Standard & Poor’s Servicer Evaluation Analytical Model (SEAM), a proprietary data collection and benchmarking model developed to collect, analyze, and benchmark industry and peer group servicer performance data. For purposes of industry comparisons, all data used in this study is derived from the period January 1, 2005 through June 30, 2005. The industry peer group used for data modeling in this study consists of residential non-prime (subprime) loan servicing portfolios with greater than 225,000 but not more than 325,000 loans serviced. The peer group for this study has been identified by Standard & Poor’s in the SEAM data collection process and as reported by Mortgage Servicing News in their Quarterly Data Report, 3rd Quarter, 2005. The servicing areas analyzed for purposes of this benchmarking study include staffing metrics, call center performance indicators, as well as collections-loss mitigation-foreclosure-REO performance metrics, pursuant to the client’s request.
January 2006
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TABLE OF CONTENTS
MANAGEMENT & ORGANIZATION METRICS: LSPE And Loan Servicing Staff FTE Count
3
Servicing Staff Turnover Rates
4
New Hire Training Metrics
5
Management Experience Levels & Tenure
6
LOAN ADMINISTRATION METRICS: Geographic Portfolio Concentration
7
Lockbox Processing Efficiencies
8
Lender Placed Insurance Rates
9
Lender Placed Insurance Rates
10
Non-Reimbursable Tax Penalties
11
CALL CENTER METRICS: Customer Service Performance
12
Customer Service Performance
13
DEFAULT MANAGEMENT METRICS: Welcome Call Contact Rate
14
Collection Call Center Metrics
15
DEFAULT MANAGEMENT METRICS:
2
Promise To Pay Success Rates
16
Roll Rate Migration Analysis
17
Forbearance Metrics
18
Foreclosure Performance Metrics
19
REO Performance Metrics
20
REO Performance Metrics
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management & organization metrics MANAGEMENT & ORGANIZATION METRICS LSPE AND LOAN SERVICING STAFF FTE COUNT
The chart below illustrates two metrics: Loans Serviced Per Servicing Employee (LSPE) and Loan Servicing FTE (Full Time Equivalent). Loans Serviced Per Servicing Employee is an efficiency measurement that represents a ratio of the number of employees dedicated to loan servicing compared Call the Center Metrics - Total Number FTE loan servicing portfolio. In the peer group with overall number of units in the comparison below, Global Mortgage has an LSPE of 461 while the peer group average is 452. Loan Servicing FTE is a measurement of those employees who are dedicated to a loan servicing function. Global Mortgage has 682 FTE dedicated to loan servicing functions, while the peer group, all of similar size and asset type, average 648 FTE dedicated to loan servicing functions.
Loans Serviced Per Servicing Employee/Loan Servicing FTE
800 700 600 500 400 300 200 100 0
Global Mortgage
PEER 1
PEER 2 LPSE
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PEER 3
PEER AVG
TOTAL FTE
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MANAGEMENT & ORGANIZATION METRICS SERVICING STAFF TURNOVER RATES
The chart below illustrates the overall turnover rate for both loan servicing management and loan servicing staff. Standard & Poor’s defines turnover as: All voluntary and involuntary turnover of staff and management. The turnover rate must also include all intra-organizational transfers (internal turnover) of personnel within the organization. Call Center Metrics - Total Number FTE As indicated below, the management turnover rate for Global Mortgage is an industry low three percent (3%), which outperforms their peer group average of six percent (6%) and is significantly better than SEAM industry comparisons. In addition, loan servicing staff turnover rate for Global Mortgage is a very low sixteen percent (16%), again outperforming their peer group average of twenty-two percent (22%). Global Mortgage’s sixteen percent (16%) staff turnover rate is also better than SEAM industry comparisons.
Turnover Rate (Jan-Dec 2005)
35% 30% 25% 20% 15% 10% 5% 0%
Global Mortgage Mgmnt
4
PEER 1 Staff
PEER 2
PEER 3
2 per. Mov. Avg. (Mgmnt)
PEER AVG 2 per. Mov. Avg. (Staff)
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B E N C H M A R K I N G
MANAGEMENT & ORGANIZATION METRICS
R E P O R T
NEW HIRE TRAINING METRICS
Standard & Poor’s views training as an integral aspect of the overall servicer ranking. Introductory or “new hire” training and orientation is especially critical in areas such as customer service and loan collections where an employee must be trained and educated in many aspects of regulatory compliance such as RESPA and FDCPA as well as how to efficiently and effectively use loan servicing technology. A solid loan servicing foundation in any organization will result in a knowlCall Center - Totalworkforce Number FTE edgeable andMetrics resourceful that will apply loan servicing policies and practices in a correct and consistent manner. As indicated in the chart below, Global Mortgage provides sixty-four (64) hours of introductory classroom training for new loan collectors. While this result compares favorably overall to industry averages as measured by SEAM, it is below the peer group average of sixty-seven (67) hours. With respect to customer service training, Global Mortgage provides one hundred and four (104) hours of classroom instruction and training which outperforms the peer group average of eighty-seven (87) hours and also outperforms industry averages as measured by SEAM.
Total Hours Entry-Level Training (Customer Service/Collections)
150
100
50
0
Global Mortgage
PEER 1
PEER 2
64
80
104
80
Collections Customer Service
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PEER 3
PEER AVG
40
80
67
60
120
87
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MANAGEMENT & ORGANIZATION METRICS
R E P O R T
MANAGEMENT EXPERIENCE LEVELS & TENURE
A key aspect of the Standard & Poor’s servicer review process is the relevant industry experience that senior and middle management bring to the loan servicing operation. Ideally, the more depth and breadth of experience that a management team brings to the organization often equates to the ultimate success of that organization’s business vision and their flexibility to change with market conditions. In addition, Standard & Poor’s also looks at the senior and middle management team’s tenure with their current organization. Present company tenure may indicate numerous factors such as that organization’s short-term and long-term operating stability, success of continuing education programs for management, promotional opportunities within the organization, and the financial compensation afforded to management. Based on the chart below, Global Mortgage’s senior management team has twentyfive (25) years of relevant industry experience which is substantially higher than their peer group average of sixteen (16) years and represents the upper tier of their industry as reflected in our SEAM database. Company tenure is also quite solid at seven (7) years, also outperforming their peer group average of four (4) years. The results for middle management at Global Mortgage are also quite good with thirteen (13) years of industry experience and five (5) years of company tenure, outperforming or matching their peer group averages of nine (9) years and five (5) years, respectively.
Senior & Middle Management Industry Experience & Company Tenure (#Yrs.)
25 20 15 10 5 0
Global Mortgage
Company Tenure Middle Mgmnt. (# Yrs.) Company Tenure Sr. Mgmnt (# Yrs.)
6
5 13 7 25
PEER 1
PEER 2
PEER 3
3 9 3 17
8 12 6 19
4 7 4 12
PEER AVG 5 9 4 16
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loan administration metrics LOAN ADMINISTRATION METRICS
G E O G R A P H I C P O R T F O L I O C O N C E N T R AT I O N
Standard & Poor’s reviews each servicer’s loan portfolio geographic concentration by number of loan units. A geographic concentration heavily situated in a particular state or region may present a risk of loss in the event of a regional economic downturn. The United States map below illustrates the geographic portfolio concentration of Global Mortgage and its peer group. The chart below shows the top three states, in terms of loan portfolio concentration (# units) for each servicer in the peer group. While each servicer has a substantial concentration of loans in their respective geographic region, Global Mortgage, as reflected in the states shaded in green, has a 33% portfolio concentration on the eastern seaboard, 67% of their loan portfolio is distributed in other states resulting in a substantial level of insulation from regional economic downturns. Peer group 1, indicated by the states shaded in yellow, and peer group 2, reflected by the states shaded in red, have the highest levels of geographic concentration. Peer group 2 has 90% of their loan servicing portfolio situated closely in the south and southwest (GA, LA, and TX) with only 10% of their portfolio spread among other states. Peer group 1 has the highest level of concentration with the entire loan servicing portfolio (100%) situated in the southwest and western Unites States.
Geographic Portfolio Concentration
OR 8%
NY 35%
CA 74%
OH 14% KY 11%
NC 57%
AZ 18% TX 55%
LA 22%
PA 18%
GA 13%
FL 14%
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LOAN ADMINISTRATION METRICS
B E N C H M A R K I N G
R E P O R T
LOCKBOX PROCESSING EFFICIENCIES
Standard & Poor’s reviews the payment processing channels utilized by loan servicers as well as the efficiencies realized by utilizing an external lockbox vendor. The chart below illustrates the lockbox processing rate, lockbox capture rate, and lastly, the lockbox error or “reject” rate, as it is also known. The degree to which a lockbox vendor is effective may also be impacted by certain external factors such as the key performance indicators inherent in the servicer-vendor agreement as well as the level of oversight and management that the servicer brings to the relationship. The first metric, the lockbox processing rate, is defined by Standard & Poor’s as: (% Annualized Of Incoming Payments Processed By Lockbox) - The percentage of all incoming monthly payments that are processed by the lockbox vendor. Lockbox Processing Efficiencies
100% 75% 50% 25% 0% Global Mortgage Lockbox Processing Lockbox Capture Lockbox Error/Reject
78.00% 98.00% 2.00%
PEER 1
PEER 2
PEER 3
PEER AVG
85.00% 97.00% 3.00%
82.00% 94.00% 6.00%
56.00% 95.00% 5.00%
74.30% 95.30% 4.60%
The lockbox processing rate for Global Mortgage at 78%, compares favorably with their peer group and exceeds the peer group average of 74.30%. The second metric, the lockbox capture rate, is defined by Standard & Poor’s as: (% Annualized) – The percentage of all payments on a monthly basis received by the lockbox vendor that are ultimately processed by the lockbox vendor. The lockbox capture rate for Global Mortgage at 98% compares favorably to their peer group average of 95.30%. The third metric, the lockbox error or “reject” rate, is defined by Standard & Poor’s as: The percentage (%) of all monthly payments that are initially rejected by the lockbox vendor upon receipt and forwarded to the servicer for further processing or research. The lockbox error rate for Global Mortgage is 2%, which is superior to the peer group average of 4.60% and compares favorably to industry averages as measured by SEAM.
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LOAN ADMINISTRATION METRICS
B E N C H M A R K I N G
R E P O R T
L E N D E R P L A C E D I N S U R A N C E R AT E S
Standard & Poor’s performs an in-depth analysis of a servicer’s handling of lender placed insurance, both hazard and flood. A critical aspect of this analysis is a servicer’s lender placed insurance rate, defined by Standard & Poor’s as: Lender placed hazard insurance coverage is defined as any account where a binder of insurance has been issued by the insurance vendor or its agents. The lender placed insurance rate is a reflection of a servicer’s internal processes that track and monitor evidence of continuing insurance coverage that protects the mortgaged asset. The servicer’s ability to manage various aspects of the outsourcing relationship with the insurance provider is arguably reflected in the lender insurance placement rate, cancellation rate, and renewal rate. The 6.25% hazard insurance placement rate compares very favorably to the peer group average of 12.50% as well as industry averages as measured by SEAM. Similarly, the .80% flood insurance placement rate compares favorably to the peer group average of 1.23, as well as industry averages as measured by SEAM. The cancellation rates for hazard and flood insurance may be considered an indicator of the internal control processes and tracking methodologies that the servicer has in place to minimize the regulatory, legal and headline risk that can come from abusive or inefficient lender placed insurance practices. The lender placed insurance cancellation rate is defined by Standard & Poor’s as: The cancellation rate is defined as the average monthly rate (annualized) of all lender placed insurance cancellations as a percentage of all lender placed flood insurance policies in force in the servicer’s portfolio during the semi-annual period noted in SEAM.
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L E N D E R P L A C E D I N S U R A N C E R AT E S
The hazard and flood insurance cancellation rates for Global Mortgage are 3% and 7%, respectively, which compare favorably with their peer group averages of 18.30% and 6.33%, respectively.
LPI Hazard & Flood Insurance Placement, Cancellation & Renewal Rates
25% 20% 15% 10% 5% 0% Global Mortgage PEER 1 PEER 2 PEER 3 PEER AVG
LPI Hazard Rate
LPI Hazard Cancellation
LPI Flood Rate
LPI Flood Cancellation Rate
LPI Hazard Renewal
LPI Flood Renewal Rate
6.25% 8.45% 12.10% 5.50% 8.68%
3.00% 13.00% 24.00% 18.00% 18.30%
0.80% 1.25% 0.75% 1.70% 1.23%
7.00% 3.00% 5.00% 11.00% 6.33%
4.90% 5.60% 11.00% 8.45% 8.35%
12.50% 17.00% 14.00% 12.75% 14.58%
Standard & Poor’s also examines the hazard and flood insurance annual renewal rates as further indication that the lender placed insurance policies have not been placed in error and that the risk of erroneous lender placed insurance policies has been minimized. The hazard and flood insurance annual renewal rates for Global Mortgage at 4.90% and 12.50%, respectively, outperform their peer group averages of 8.35% and 14.58%, respectively.
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NON-REIMBURSABLE REAL ESTATE TAX PENALTIES
Standard & Poor’s analyzes the non-reimbursable real estate tax penalties that are incurred by servicers. Non-reimbursable real estate tax penalties may be an indicator of inefficiencies in the new loan process from originations and/or boarding to loan servicing set-up. It may also be indicative of data integrity controls, ineffective management oversight, or inadequate oversight of vendor processes. Non-reimbursable real estate tax penalties are defined and calculated by Standard & Poor’s as: This calculation should be based on the servicer's total portfolio of first mortgage loans and should be expressed as cents per loan-annualized. 'Non-reimbursable' is defined as penalties incurred by virtue of circumstances outside of the servicer's control and should not include penalties that may be reimbursed by a third party service provider.
Non-Reimbursable Real Estate Tax Penalties
$1.40
$1.20
$1.20 $1.00 $0.73
$0.73
$0.80 $0.60 $0.24 $0.40
$0.18
$0.20 $0.00
Global Mortgage
PEER 1
PEER 2
PEER 3
PEER AVG
Non-Reimbursable Real Estate Tax Penalties
The non-reimbursable real estate tax penalties for Global Mortgage are low at eighteen cents ($0.18) per loan, which compares favorably to their peer group average of seventy-three cents ($0.73).
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call center metrics CALL CENTER METRICS
CUSTOMER SERVICE PERFORMANCE
Standard & Poor’s measures call center performance based upon a wide variety of performance metrics. Perhaps the most prominent of these metrics are the average speed to answer, average talk time, and average wrap time. Standard & Poor’s defines average speed to answer as: (Seconds Annualized) - The average speed of answer (ASA) is calculated by the automated call distributor (ACD) as soon as the call is cued and is waiting to be answered. If the servicer's ACD is using overflow, the ASA timing should begin as soon as the call has cued, not at the time the call has overflowed.
Call Center Metrics (Seconds)
80
400
70 300
60 50 40
200
30 20
100
10 0
Global Mortgage
Average Speed To Answer 46 Average Talk Time 256 Average Wrap Time 42 (right scale)
PEER 1
PEER 2
PEER 3
PEER AVG
82 310 65
55 245 36
120 345 70
85.7 300 57
0
The average speed to answer for Global Mortgage is a highly efficient 46 seconds, which compares quite favorably to the peer group’s 85.7 second average speed to answer and is highly effective based on SEAM industry performance indicators. In addition, the average talk time as reported by Global Mortgage at 256 seconds outperforms the peer group average of 300 seconds. Average talk time is defined by Standard & Poor’s as: The total time that callers are connected with agents. This calculation should be provided as an overall average during the past six months, annualized, in seconds per agent. Lastly, average wrap time, as reported by Global Mortgage, is 42 seconds, which outperforms the peer group average of 57 seconds. Average wrap time is defined by Standard & Poor’s as: (Also known as 'after-call work') - Wrap time is defined as time (in seconds) that the agent is unavailable to receive another inbound call while in this mode.
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CALL CENTER METRICS
B E N C H M A R K I N G
R E P O R T
CUSTOMER SERVICE PERFORMANCE
Among the other call center performance metrics that Standard & Poor’s tabulates is the VRU (voice response unit), abandonment rate, and first call resolution rate. The VRU capture rate is defined by Standard & Poor’s as: Voice response unit capture rate is defined as the percentage of inbound calls routed through the VRU (a/k/a Interactive Voice Response Unit) that are successfully completed by the VRU technology without the need for further call routing. The VRU capture rate for Global Mortgage is 35% which is competitive with its peer group average of 35.30%. The abandonment rate for Global Mortgage is 4.80% which is significantly better than its peer group average of 7.37%, although there is room for improvement when measured against industry performance benchmarks as reported in SEAM. Standard and Poor’s defines the abandonment rate as: All calls abandoned divided by all calls abandoned + all calls answered. Call Center Metrics (% Annualized) 100% 75%
50%
25%
0% VRU (IVR) Capture Rate AbandonmentRate First Resolution Rate
Global Mortgage
PEER 1
PEER 2
PEER 3
PEER AVG
35.00%
27.00%
4.80%
6.00%
32.00%
47.00%
35.30%
5.10%
11.00%
7.37%
78.00%
82.00%
65.00%
88.00%
78.33%
Lastly, Standard & Poor’s analyzes call center first call resolution. While this metric is an indicator of overall customer satisfaction, it is also provides insight into the level of training of call center employees, familiarity of training, and efficiency of internal processes. First call resolution is defined by Standard & Poor’s as: The percentage (%) of all calls answered that do not require any further contact to resolve the customer's initial inquiry. Resolution may be defined as: 1) agent does not need to transfer the call; 2) customer states, when asked, that the inquiry has been resolved; 3) agent has no follow-up work to perform; 4) a hard coded call tracking code used by the servicer to denote a 'call resolution has been assigned to the account. The first call resolution rate as reported by Global Mortgage is competitive with its peer group average of 78.33%. www.standardandpoors.com
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default management metrics DEFAULT MANAGEMENT METRICS
W E L C O M E C A L L C O N TA C T R AT E
An important aspect of non-prime servicing are welcome calls made by the servicer to new borrowers. The welcome call establishes contact, reinforces the loan terms, payment due dates, and validates the borrower’s information. While most servicers in the non-prime sector routinely perform welcome calls, Standard & Poor’s collects the ‘contact’ or ‘hit’ rate. This is defined by Standard & Poor’s as follows: The welcome call contact rate is defined as the percentage (%) of all outbound calls attempted where a successful contact with the borrower(s) was made. This calculation should only include conversations with the borrower(s)/obligor(s) and not the percentage (%) or number of attempts or left messages. As illustrated by the chart below, Global Mortgage, at 96%, achieves superior results when compared to the welcome call contact rate of its peer group at 71.30%.
Welcome Call Contact Rate 100%
96.00%
78.00%
80% 71.30%
74.00% 60%
62.00%
40% 20% 0%
Global Mortgage
PEER 1
PEER 2
PEER 3
PEER AVG
Welcome Call Contact Rate
Loan servicing organizations allocate substantial financial and human resources in an effort to contact delinquent borrowers and bring those delinquent accounts to performing status. Standard & Poor’s analyzes the overall effectiveness of these outbound calling campaigns through a variety of metrics; however, an analysis of how effectively a servicer can respond to inbound collection call traffic is also important to assess the ease with which delinquent borrowers can return calls and make payments or payment arrangements. A high inbound call abandonment rate or even a blockage rate, can frustrate borrowers, increases the flow of loans into delinquency buckets and result in regulatory, legal and headline risk.
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DEFAULT MANAGEMENT METRICS
B E N C H M A R K I N G
R E P O R T
COLLECTION CALL CENTER METRICS
Collection Call Center Metrics
125
14.00% 12.00%
100
10.00% 75
8.00% 6.00%
50
4.00% 25 0
2.00% Global Mortgage
PEER 1
ASA (Seconds)
PEER 2
PEER 3
PEER AVG
0.00%
Abandonment Rate (%)
As illustrated in the chart above, Global Mortgage reported a 70 second average speed to answer which outperforms the peer group average of 84.3 seconds. Standard & Poor’s criteria suggests that a highly effective speed to answer for inbound collection call centers should be below 60 seconds. The average speed to answer for inbound collection calls is defined by Standard & Poor’s as: The inbound collection call average speed of answer (ASA) is calculated by the automated call distributor (ACD) as soon as the call is cued and is waiting to be answered. If the servicer's ACD is using overflow, the ASA timing should begin as soon as the call has cued, not at the time the call has overflowed. Similarly, the abandonment rate of inbound call traffic into the collections cue is analyzed. The abandonment rate is defined by Standard & Poor’s as: All calls abandoned divided by all calls abandoned + all calls answered. The call abandonment rate as reported by Global Mortgage is 9.80%, which does not compare favorably to the peer group average of 7.95% and should be improved. Standard & Poor’s criteria suggests that an acceptable call abandonment rate should be below 3%. Another key area of performance benchmarking within a collection call center is measuring collector performance in the successful completion of a promise to pay. The promise to pay success or ‘completion’ rate, is an indicator of how well trained the collection staff is in negotiation skills and identifying a borrower’s willingness and ability to pay. The chart below illustrates promise to pay success rates in the 30+ day and 60+ day delinquency buckets while also measuring the average promise to pay agreements secured per hour, per collector.
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default management metrics DEFAULT MANAGEMENT METRICS
P R O M I S E T O PAY S U C C E S S R AT E S
Promise to Pay Success Rates
90.00%
90.00% 85.00%
80.00% 80.00% 75.00% 70.00% 70.00% 60.00%
Global Mortgage
PEER 1
PEER 2
PEER 3
PEER AVG
30+ Days
80.92%
82.34%
78.45%
77.60%
79.46%
60+ Days
77.64%
75.40%
72.80%
68.90%
72.37%
Dialer Hour
85.50%
83.72%
79.23%
72.80%
78.58%
65.00%
The promise to pay success rate as defined by Standard & Poor’s is: % promises kept vs. promises made Global Mortgage reported promise to pay success rates of 80.92% and 77.64% in the 30+ and 60+ day delinquency buckets, respectively. These results compare favorably to the peer group averages of 79.46% and 72.37% in the 30+ and 60+ day delinquency buckets, respectively. With respect to the promise to pay per dialer hour ratio, Global Mortgage reported 85.50% which is superior to the peer group average of 78.58%. The promise to pay per dialer hour ratio is defined as: (Promises Confirmed Per Dialer Hour) – Defined as the percentage (%) of overall promises to pay confirmed per dialer hour of outbound call center activity (% annualized). Standard & Poor’s also performs roll rate migration analysis to assess the effectiveness of the overall collection effort. As the chart below illustrates, Standard & Poor’s reviews the flow of delinquent accounts from the 90+, 60+, and 30+ day delinquency buckets back to a performing or ‘current’ status. More specifically, roll rate migration is defined by Standard & Poor’s as: Roll rate migration from the delinquency buckets specified in the SEAM data field is defined as the percentage (%) of all accounts delinquent in the specified delinquency bucket (i.e., 30-59, 60-89, 90+ days) that roll from this category to current status within a one month cycle (annualized). 16
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B E N C H M A R K I N G
R E P O R T
R O L L R AT E M I G R AT I O N A N A LY S I S
Roll Rate Migration From Designated Bucket To Current Status 40.00% 30.00%
20.00%
10.00%
0.00%
Global Mortgage
PEER 1
PEER 2
PEER 3
PEER AVG
30-59 Day
33.90%
27.65%
24.56%
31.20%
27.80%
60-89 Day
13.59%
15.10%
14.65%
17.45%
15.73%
90+ Days
3.69%
2.85%
2.25%
3.26%
2.79%
Global Mortgage reported roll rate migration results of 33.90%, 13.59%, and 3.69% in the 30+, 60+ and 90+ day delinquency categories, respectively. These results compare favorably with the peer group averages of 27.80%, 15.73%, and 2.79% in the 30+, 60+ and 90+ day delinquency categories, respectively. In the loss mitigation area, servicing organizations have an opportunity to use various loss mitigation strategies such as forbearance plans, deed-in-lieu, short sale, etc. to bring delinquent accounts to a performing or satisfied status and minimize loss severity. Among the many performance benchmarks that are collected by Standard & Poor’s in this area, the success of forbearance plans, which are often the most utilized loss mitigation strategy by servicers, are closely analyzed. The break rate of forbearance plans is analyzed during the initial six month cycle of a forbearance plan. The break rate is defined by Standard & Poor’s as: A formal written forbearance plan that becomes delinquent during the specified cycle as indicated in the SEAM questionnaire data field. The break rate represents the percentage (%) of overall active forbearance plans during the most recent six (6) month period as specified in the SEAM questionnaire that failed during the delinquency bucket/cycle indicated in the SEAM data field. The forbearance break rate is an indicator of the veracity of the initial repayment plan as well as providing insight into the servicer’s methodologies and training for identifying and qualifying potential loss mitigation candidates.
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DEFAULT MANAGEMENT METRICS
B E N C H M A R K I N G
R E P O R T
FORBEARANCE METRICS
As indicated in the chart below, the forbearance break rates in each of the six delinquency categories as reported by Global Mortgage outperform the peer group average in every category.
Forbearance Metrics: Break Rates, Cure Rate & Recidivism Rate 80.00% 60.00% 40.00% 20.00% 0.00%
Similarly, Standard & Poor’s collects additional data such as the overall cure rate of all forbearance plans to gauge what percentage of all forbearance plans are ultimately successful. Specifically, the forbearance cure rate is defined by Standard & Poor’s as: The percentage (%) of loans in foreclosure that were successfully cured ('cure' may include a completed forbearance plan, full payment of all arrearages, executed deed-in-lieu, completed short sale/short payoff, etc.). (Foreclosure is defined as the point in time that the servicer refers the file to legal counsel with instruction to commence foreclosure proceedings.) The forbearance cure rate, as reported by Global Mortgage, is 66.70%, which substantially outperforms the peer group average of 46.52% and also compares favorably with industry benchmarks as measured by SEAM. Lastly, the recidivism rate is tabulated to determine how many successful forbearance plans ultimately failed six months after they cured. A high recidivism rate may indicate that a different loss mitigation approach of a long-term nature or solution may have been more appropriate for the borrower. The forbearance recidivism rate is defined by Standard & Poor’s as follows: The recidivism rate is defined as the rate (%) (annualized) of formal forbearance plans that successfully completed per agreement but subsequently redefaulted within six (6) months of curing. A 'redefault' is defined as a 30-59 day delinquency.
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Global Mortgage reported a forbearance recidivism rate of 10.61% which compares very favorably to the peer group average of 28.57% as well as surpassing the industry average as reported in SEAM. DEFAULT MANAGEMENT METRICS
FORECLOSURE PERFORMANCE METRICS
While Standard & Poor’s concurs with accepted industry practice that loss mitigation should continue unabated on a dual path with other collection efforts, foreclosure is sometimes inevitable. Foreclosure timeline compliance is an essential benchmark to measure a servicer’s internal processes as well as the effective management of outside vendors. Foreclosure timeline compliance is defined by Standard & Poor’s as: Standard is defined as the 'average days to foreclose' within each state as defined by Fannie Mae, FreddieMac, state statute, or whichever designated benchmark or combination of benchmarks the servicer is utilizing. Foreclosure Performance Metrics 100.00% 80.00% 60.00% 40.00% 20.00% 0.00%
Global Mortgage
PEER 1
PEER 2
PEER 3
PEER AVG
Completion To Standard
96.77%
98.75%
94.65%
88.00%
93.80%
Foreclosure Cure Rate
11.61%
21.00%
36.75%
46.28%
34.68%
Foreclosure timeline compliance as reported by Global Mortgage is 96.77%, superior to the peer group average of 93.80%, indicating effective oversight of the foreclosure process. As previously stated, loss mitigation efforts should continue on a dual path during the foreclosure process. Accordingly, Standard & Poor’s collects the foreclosure cure rate as an indication of a servicer’s loss mitigation success in the late stages of delinquency. This data is balanced with an analysis of numerous other factors including roll rate migration patterns and promise to pay success rates to ultimately determine if a loss mitigation solution could have been successfully negotiated earlier in the loan delinquency cycle. Global Mortgage reported a foreclosure cure rate of 11.61%, which is substantially lower than the peer group average of 34.68%.
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DEFAULT MANAGEMENT METRICS
B E N C H M A R K I N G
R E P O R T
REO PERFORMANCE METRICS
A final but yet integral aspect of managing loss severity is the REO (Real Estate Owned) process. Although there are many aspects of measuring REO management effectiveness, the chart below reflects some of the more commonly used performance metrics.
REO Performance Metrics (# Days)
600 500 400 300 200 100 0
Global Mortgage Eviction Time 85 Turnaround Time 196 Marketing Time 122 Oldest Asset Held 386
PEER 1 96 212 164 512
PEER 2 110 184 156 213
PEER 3 98 225 186 412
PEER AVG 101.3 207 168.7 379
As the chart illustrates, Global Mortgage reported an average eviction time of 85 days which is superior to the peer group average of 101.3 days. In addition, the turnaround time and overall marketing time as reported by Global Mortgage at 196 days and 122 days, respectively, outperforms the peer group average of 207 days and 168.7 days, respectively. The REO inventory turnaround time is defined by Standard & Poor’s as: The number of days, average (annualized), that an REO asset is carried in inventory. The REO marketing time is defined by Standard & Poor’s as: The number of days from post-eviction status to real estate owned (REO) property closing date.
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REO PERFORMANCE METRICS
The chart below illustrates REO disposition metrics that are reflective of a servicer’s ability to obtain accurate valuations, develop strategic relationships with brokers, effectively review and manage marketing plans and efficiently execute the overall asset disposition process to minimize the ultimate loss severity.
REO Disposition Metrics 100.00% 80.00% 60.00% 40.00% 20.00% 0.00%
PEER 2
PEER 3
15.00%
18.00%
22.00%
Gross v Market Value 96.14%
94.65%
91.00%
92.30%
92.65%
Net v Market Value
86.43%
84.70%
83.00%
84.71%
Inventory Turn Rate
Global Mortgage 25.00%
88.75%
PEER 1
PEER AVG 18.33%
The inventory turn rate, as reported by Global Mortgage, is 25%, outperforming the peer group average of 18.33%. The inventory turn rate is defined by Standard & Poor’s as: Those REO assets that complete a successful closing as a percentage of the total monthly REO portfolio inventory (six month history annualized). Gross sales and net sales to market value are two additional performance benchmarks that reflect a servicer’s ability to obtain a maximum recovery at REO sale. Gross sales to market value and net sales to market value calculations are defined by Standard & Poor’s as follows: 1) Gross sales to market value - The overall average percentage of market value to gross sales price ratio (% Annualized) realized on your real estate owned (REO) inventory dispositions. 2) Net sales to market value – The overall average percentage of market value to net sales price ratio (% annualized) derived from real estate owned property dispositions. The 'net sales' price should be exclusive of all carrying costs, interest, fees, expenses, disposition costs, etc. and should only be based upon the 'net/net' of the REO property disposition Global Mortgage reported a gross sales to market value of 96.14% which outperforms the peer group average of 92.65%. The net sales to market value reported by Global Mortgage is 88.75%, which is superior to the peer group average of 84.71%, indicating solid management of the REO sales process.
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Notes
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