Tier Ranking System (TRS)

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HUD implemented the Tier Ranking System (TRS) in 2000 as a pilot to measure servicer's utilization of HUD's loss mitigation program.

Announcement: TRS Round 34 Release and Incentive Payment Information

The Tier Ranking System (TRS) notification letters for Round 34 were released via US mail to the ranked servicing lenders on December 15, 2008. The incentive payments for all lenders ranked as Tier 1 for Round 34 began for claims processed on or after January 1, 2009. All questions regarding related issues should be directed to mailbox sfdatarequests@hud.gov.

Why TRS?

TRS rankings are used by HUD to determine which servicers are utilizing HUD's loss mitigation tools. Servicers in Tiers 3 and 4 (the lowest rated tiers) are routinely targeted for training by the NSC as well as possible investigation or audit by the Office of Lender Activities.

	Measures a servicer's loss mitigation engagement alone.
	Can be calculated by a servicer because the data of other servicers is not required to make the calculation.
	Until Round 20, TRS DID NOT determine increased loss mitigation incentives, increased foreclosure reimbursement, or longer PFS time frames.
	Scores are released quarterly and are based on data from a rolling 12 month rating period.

TRS Incentives

	An additional $100 payment for each Special Forbearance Agreement executed on or after January 1, 2009;
	Pre-foreclosure sale time frames may be extended an additional two months without prior HUD approval; and
	For loans endorsed on or after February 1, 1998, lenders will be able to claim reimbursement of 75 percent for foreclosure costs (an increase from the current allowance of 66 percent) on Part B claims received by HUD on or after January 1, 2009. For loans endorsed prior to February 1, 1998, all lenders will continue to be reimbursed two thirds of the foreclosure costs.
	The list of Tier 1 lenders for Round 34 is an attachment to ML 09-04.

TRS Work Out (WO) Ratio

The most significant change to the TRS formula occurred effective Round 6, when it evolved into the WO Ratio. In Round 12, Accelerated Claims Disposition (ACD) cases were added as an additional loss mitigation factor. (Additional information about ACD can be found in HUDCLIPS. We also have information about the changes to the TRS parameters and benchmarks). Simply put, the work out ratio is loss mitigation divided by loss mitigation plus foreclosures. The actual formula is:

Where HUD gets the data

HUD collects information on formal forbearances (FFs) through HUD's SFDM System. Servicers who initiate forbearances and report codes 09 (special forbearance) - but do not file an incentive claim as when used in a combination with a mortgage modification or partial claim - 12 (repayment), and 32 (military indulgence) during a rating period are given credit for that forbearance. For TRS, HUD uses the default cycle date that indicates the first time the servicer reported the FF in an episode as the date of record.

HUD collects information on terminations (PFSs, DILs, ACDs, and FCs) through paid conveyance claims that servicers file. For TRS, HUD uses the FHA insurance date claim was processed as the record date.

	A maximum of one loss mitigation event (forbearance, special forbearance, mortgage modification, partial claim, preforeclosure sale, deed-in-lieu, or accelerated claims disposition) is counted for each loan per ranking period.
	All foreclosures are counted.
	Servicers with less than 11 foreclosures and a ratio that puts them into Tiers 3 or 4 are not ranked. However, servicers with less than 11 foreclosures and ratio that puts them into Tiers 1 or 2 are ranked in their respective Tier.
	Tier 1 is the highest ranking (indicating best servicing performance insofar as the application of HUD's loss mitigation is concerned)
	Tier 4 is the lowest ranking (indicating worst servicing performance insofar as the application of HUD's loss mitigation is concerned)

WO Ratio determines Tier Ranking

A tier ranking is assigned to servicers based on their Work Out (WO) Ratio. The current tier benchmarks were assigned at Round 14:

Tier	Work Out (WO) Ratio
1	Greater than 0.79999
2	0.60 to 0.79999
3	0.40 to 0.59999
4	Less than 0.40

Publication of TRS Scores

At this time, TRS scores are not public information. Servicers are notified of their score by individual letter.

Tiering Rounds to Date

The following table shows the period reviewed and the dates those scores were released. We also have electronic copies of the last four scoring announcement letters and the latest scoring summary.

The following table provides a breakdown of servicers in each tier.

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