In what may be the next arena of expansion for the rating agencies, Moody's Investors Service has assigned its first servicer rating for a non-mortgage entity. As was the case when rival Standard & Poor's launched its non-mortgage servicer ratings last October (see ASR 10/6/03), Moody's views the credit card sector as where servicer ratings have value. Look for Moody's to move into other assets as well.
The inaugural non-mortgage servicer rating was assigned by Moody's March 4 to The First National Bank of Omaha, which received a rating of SQ3. Moody's reportedly has other credit card servicers in the pipeline, scheduled to receive ratings in the coming months, although no specific issuers were disclosed.
"We have over thirty servicer ratings in the RMBS market this is just really leveraging off the success of the RMBS servicer rating product," Black added.
While currently focused just on the credit card sector, Moody's is expected to branch out its non-mortgage-ABS SQ servicer ratings to a bourgeoning sector of the market, which has numerous neophyte servicers in the market - student loans.
Moody's SQ servicer ratings are based on five aspects of a servicer's ability: collections, business strength, corporate compliance and oversight, systems and technology and customer service. The full methodology explaining Moody's SQ rating rationale is due out by the end of the month.
"This is basically just a tighter focus on something that is already a component of our broader ABS ratings," said Senior Credit Officer Will Black. "This is s service for those issuers and investors seeking transparency in servicing quality," he added.
In order to receive a rating, a servicer is subject to onsite visits to its various servicing and collections operations. First National Bank of Omaha, for example, has collections and servicing operations in Nebraska, South Dakota and Georgia.
First National is an obvious target to receive such a rating, as it is a relatively infrequent issuer in the primary ABS market, with just three term securitizations to date, but it has taken over the servicing operations for two of the larger failures in the history of the market - NextCard and Spiegel/First Consumers National Bank. The unit that handles its third-party servicing operations, FDR, is a Georgia-based specialty subprime servicer named InfiBank. The proprietary portfolio, named The Bankcard System, is serviced directly by First National of Omaha.