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. There is some confusion between the TRS and the Loss Mitigation Performance Analysis (LMPA). Hopefully this page will clarify the differences.

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.

Loss Mitigation Performance Analysis (LMPA)...

• measures a servicer's performance against other servicers.
• cannot be calculated by a servicer because the data for the whole universe of servicers is required to calculate LMPA scores.
• designates those servicers in the Top 25th percentile for each volume category as eligible for increased loss mitigation incentives, increased foreclosure reimbursement, and longer PFS time frames.
• scores are released once per year (by Mortgagee Letter) and are based on data from the previous federal fiscal year (October 1 through September 30).

Tier Ranking System (TRS)...

• measures a servicer's performance alone.
• can be calculated by a servicer because the data of other servicers is not required to make the calculation.
• does 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.

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 the SFDMS system. Servicers that initiate forbearances and report codes 09 (forbearance), 12 (repayment), and 32 (military indulgence) during a rating period are given credit for that forbearance. For TRS, HUD uses the mortgage status date (as reported to SFDMS by the servicer) 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 termination date 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 whose HUD approval was terminated more than 6 months prior to the beginning of the ranking period are not ranked.
• 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. However, announcement letters and scoring summary data is available below and by following the links provided in the table.

Tiering Rounds to Date

The following table outlines the TRS rounds to date. It shows the period reviewed and the dates those scores were released. Links to scoring announcement letters from Round 6 to present are in the "Scores Released" column. Links to scoring summaries from Round 11 to present are in the "Scoring Summary" column.

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

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