Although often overshadowed by topics related to origination, the more mundane servicing issues of investor reporting, loss mitigation, and payment disposition are equally important. For the residential mortgage-backed securities (RMBS) investor, these functions can have a dramatic impact on an investment's profitability. For Standard & Poor's, these third-party functions are crucial to credit analysis.
The quality of servicing of the mortgage loans backing rated certificates is an integral component to the performance of a transaction, and it has a direct effect on losses incurred in a transaction. Because servicing performance standards for the nonconforming product do not exist, measuring servicer efficiency is a critical part of credit analysis.