STAR Scorecard: Loan Servicer Performance Metrics Explained

By: Jann Swanson •

Last week Fannie Mae announced the Servicer Total Achievement and Rewards Program or "STAR" which is intended to measure and evaluate the performance of servicer actions in helping homeowners avoid foreclosure.  STAR's initial component, the Servicer Performance Scorecard, will provide regular snapshots and trends for key performance indicators to help servicers effectively assess their own progress.  This week MND had the opportunity to obtain more details from Leslie Peeler who heads up the program.  

Peeler said that the scorecard measures how well servicers are fulfilling their obligation to help distressed borrowers but places no further reporting burden on the servicers.  Fannie Mae is currently in the process of using the scorecard and 2010 data to show servicers how well they met performance goals in this area over the past year. Going forward, the scorecard information will be transmitted to servicers on a monthly basis.

The scorecard covers four performance categories:

  • Roll rates. Measures loans progress through the various stages of delinquency.
  • Solution delivery. The number of borrowers assisted, the number of borrowers who are able to retain their homes, and the number of loans liquidated (via deed-in-lieu or pre-foreclosure sale but not through foreclosure), as a ratio of the universe needing help.
  • Workout effectiveness. How many loans that were modified are still performing in three, six, and 12 months? Was the right solution prescribed and was follow-through appropriate?
  • Time line management. Were actions performed efficiently? How long did it take to initiate a foreclosure or retention action? How long did a loan remain in seriously delinquent status?

Loans are matched against a like set of loans so that reasonable comparisons of servicer performance can be made.

Peeler said that details are still being worked out as to how top servicers will be recognized and appropriate incentives and rewards.  "The program is designed to identify, recognize and reward top performers," she said.   "However it will also identify those servicers not meeting expectations. Consistent with current practices, penalties are to be handled outside of the STAR Program."

 A second aspect of STAR will be announced shortly. This will be a servicer capability model which will provide metrics to measure servicers' internal processes.