Moody's Investors Service will begin adding plus and minus gradients to its servicer ratings, the New York-based rating agency announced May 10. The change will take effect only on new ratings.
The move will align Moody's with Fitch Ratings, which uses the plus and minus system, while Standard and Poor's grades servicers using Average,' Above Average' and Strong' mnemonics.
"It's a big deal. We really needed to, and wanted to, increase granularity," said Warren Kornfeld, senior vice president at Moody's.
Pluses and minuses will be added to Moody's SQ2, SQ3 and SQ4 rating categories; a minus will be added to deserving SQ1 ratings. The new ratings gradations will not be retroactively applied to outstanding servicer ratings, and they are not to be interpreted as upgrades or downgrades, he said.
Because the bulk of servicers rated by Moody's are considered above average and strong, there was more of a need to differentiate between servicers, he added.
The move comes as regulators and investors are asking for more information from servicers to ensure against "predatory" servicing practices and defaults. Moody's began requiring additional information from servicers late last summer, Kornfeld said, such as more detailed loan-level information and characteristics of bankruptcy and repayment plans.
(c) 2005 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.