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EXHIBIT 91
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METHODOLOGY US RMBS Master Servicer Quality
(OTHER PERMISSIBLE
SERVICES) Assessments
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Table of Contents: This methodology replaces “Moody’s Methodology for US RMBS Master Servicer Quality
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OVERVIEW 1 Ratings” dated March 31, 2009. We are aligning the text to conform with our definition of SQ
MASTER SERVICER QUALITY ASSESSMENT assessments, which are opinions of the ability of a servicer to prevent or mitigate losses in a
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NOMENCLATURE 2 securitization. As such, SQ assessments are not credit ratings, but are instead classified as
CREDIT ENHANCEMENT ADJUSTMENTS 3 Other Permissible Services. Aside from these and other editorial changes, the content of this
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Reporting and Remitting methodology has not changed.
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Compliance and Monitoring 6
Servicing Stability 7
APPENDIX 1 10
MOODY’S RELATED RESEARCH 12 Overview
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Analyst Contacts: A Servicer Quality (SSQ) assessment for a U.S. RMBS master servicer represents our opinion of
both: i) a master servicer's ability to oversee and monitor primary servicer activities in accordance
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NEW YORK +1.212.553.1653 with applicable securitization transaction agreements and standard servicing practices, and ii) the
William Fricke +1.212.553.4586
stability of its operations. The oversight provided by master servicers can have a direct impact on
Vice President - Senior Credit Officer realized loss levels in RMBS transactions. Servicer Quality assessments for master servicers range
william.fricke@moodys.com from SQ1 (Strong) to SQ5 (Weak). Our assessments for master servicers are monitored on a
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Navneet Agrawal +1.212.553.3674 periodic basis, taking into account the impact of changing market conditions and operating
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Managing Director - Americas practices.
navneet.agarwal@moodys.com
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Master servicer quality assessments are supported by component evaluations such as reporting
MOODY'S CLIENT SERVICES:
and remitting processes, compliance and monitoring capabilities and servicing stability. The scale
New York: +1.212.553.1653
Tokyo: +81.3.5408.4100 for each of the component assessments ranges from strong to weak. Please refer to Appendix 1 -
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London: +44.20.7772.5454 Moody's Master Servicer Assessment Grid for a listing of the key components reviewed as part of
Hong Kong: +852.3551.3077
Sydney: +612.9270.8100
our master servicer assessment.
Singapore: +65.6398.8308
ADDITIONAL CONTACTS:
Our methodology assesses the capacity to perform master servicing oversight within a
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Website: www.moodys.com
securitization. While a formal rating of the master servicer is not required, we will perform an
operational assessment of the capabilities of the master servicing operations. We incorporate
either the formal rating or the operational assessment in our case-by-case evaluation of each
securitization. The credit enhancement levels of the securitization generally can be impacted in
the range between -10% and +10% depending on the level of oversight that the master servicer
provides over the primary servicer, the securitization experience of the master servicer, the
collateral product type and the number of primary servicers in the transaction.
This methodology is no longer in effect.For information on rating methodologies
currently in use by Moody’s Investors Service, visit www.moodys.com/methodologies
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Our assessment of a master servicer's reporting and remitting ability evaluates the entity's capacity to
ensure high quality data reporting as well as timely and accurate remittance of cash to the trust. As part of
our analysis, we evaluate the master servicer's interface to obtain and process data from primary servicers
prior to boarding loans to the master servicing system. We assess the master servicer's ability to process
loans independently of the primary servicer and communicate discrepancies concerning loan-level data. We
focus on the master servicer's validation of remittance data that is received from the primary servicer.
We evaluate a master servicer's compliance and monitoring capabilities by analyzing how the master
servicer oversees the activities of primary servicers. We consider the master servicer's ability to establish and
reinforce primary servicer operating practices as specified in securitization documents as well as through its
Servicer Guide, where applicable. An annual on-site review is an important element in the master servicers'
oversight process. The on-site review allows the master servicer to identify risks present in various primary
servicing functions and sample additional loan-level data to verify the efficiency of servicing practices. In
addition, periodic desk reviews, which involve the master servicer sampling selected loans without a site
visit, can provide a supplemental level of oversight.
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Our analysis of servicing stability takes into account a number of factors which impact the master servicing
entity as a whole. Financial strength has a strong influence on our view of servicing stability. In addition to
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financial strength, the level of integration of the master servicing group within the parent corporation's
mortgage operations as well as its overall business is analyzed. The master servicer’s securitization
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experience is taken into account. Further areas of focus include: an evaluation of the internal control
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environment, the ability of the master servicer to provide adequate staffing and training as well as the
robustness of the technology employed by the master servicer to monitor primary servicer performance.
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Master Servicer Quality Assessment Nomenclature
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The assessments for master servicers of residential mortgage loans range from SQ1 (Highest) to S Q5
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(Lowest). Master servicers that receive an SQ1 assessment are characterized as "Strong". Such master
servicers have the capacity to perform the full range of master servicing oversight for a securitization.
Servicer Quality assessments are distinguished by modifiers as seen in Exhibit 1. Modifiers (+) and (-) can be
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applied to master servicers in the range from SQ2 (Above Average) to SQ4 (Below Average). A negative
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modifier can be applied to a master servicer assigned an assessment of SQ1 (Strong).
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EXHIBIT 1
Servicer Quality Assessment Scale
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This publication does not announce
a credit rating action. For any
credit ratings referenced in this
publication, please see the ratings
tab on the issuer/entity page on
www.moodys.com for the most
updated credit rating action
information and rating history.
Source: Moody’s
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Master servicer assessments are supported by component evaluations of the entities in: 1) reporting and
remitting processes 2) compliance and monitoring capabilities and 3) servicing stability. The scale for each
of the component evaluations ranges from strong to weak. See Exhibit 2.
EXHIBIT 2
Key Components of a Master Servicer Quality Assessment
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Source: Moody’s
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Credit Enhancement Adjustments AT
Our methodology evaluates the capacity of the servicer to perform master servicing oversight for a number
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of securitizations. While a formal assessment of the master servicer is not required, we will perform an
operational assessment 1 of the capabilities of the master servicing operations. We incorporate either the
formal rating or the operational assessment in the context of a securitization where the agreed upon
contractual level of master servicer oversight may vary based upon the terms and conditions of the
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transaction.
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We undertake a case-by-case evaluation of each securitization. When evaluating the impact of a master
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servicer within a transaction, we review criteria in areas that impact the monthly reporting and remitting
cycle as well as default and claims management. Exhibit 3 below provides a sample of the areas of focus
that are utilized by our analysts in assessing the transaction impact of a master servicer:
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EXHIBIT 3
Key Components of a Master Servicer Assessment
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Monthly Reporting and Remitting Cycle
» Use of a system to independently calculate loan-level parameters for each loan in security
» Cash balancing of remitted amount from primary servicer(s) to expected amount from master servicing system
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Default and Claims Management
» Oversight of primary servicer's default management timelines
» Review of primary servicer's loss mitigation options
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» Loan-level review of all losses incurred in the transaction
Source: Moody’s
The adjustment to credit enhancement levels for master servicers generally ranges between -10% and +10%
depending on the securitization experience of the master servicer, the collateral product type such as prime
or subprime loans, the number of primary servicers in the transaction as well as the assessments assigned to
primary servicers.
1 Typically, an operational assessment is more limited in scope than a Servicer Quality assessment as it addresses the servicer's potential impact within a specific
securitization.
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The experience of the master servicer is measured by the performance of securitizations where the master
servicer has provided oversight on a non-interim basis. In general,
in our analysis, we place less emphasis on
a master servicer's interim oversight or experience with portfolios which have not been securitized.
The collateral product type can influence credit enhancement adjustments. Two key parameters, credit
quality and product structure, are considered. We view collateral with a lower credit quality as necessitating
a greater level of master servicer oversight. The associated benefit to the securitization of a master servicer
within the transaction for lower quality credit is therefore typically greater, other factors held constant.
Collateral product type, such as prime and subprime loans, also plays a role in evaluating the impact to
credit enhancement levels. The more complex the underlying product, the greater the value of oversight
provided by the master servicer. Some examples of products that require more robust reporting and
remitting oversight include: adjustable rate mortgages which require interest rate changes during the life of
the loan; Option ARMs that require a series of different potential amortization paths; or Home Equity Lines
of Credit that allow for multiple draws over the term of the transaction.
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The credit enhancement adjustments for master servicers are also influenced by the primary servicers within
the transaction. A master servicer's oversight of the reporting and remitting process becomes more complex
as the number of primary servicers in the transaction increases. We consider the possibility that a master
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servicer may have an increased probability of reporting and/or remitting errors as the number of primary
servicers increases.
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The magnitude of the credit enhancement adjustment related to master servicing varies based on our
assessment of the primary servicer(s). The more positively we view the operational capabilities of a primary
servicer, all else being equal, the less potential benefit we accord for the master servicer in the transaction.
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Reporting and Remitting
To shape an opinion of a master servicer's ability to oversee reporting and remitting, we evaluate the
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entity's capacity to ensure high quality loan boarding, data reporting as well as timely and accurate
remittance of cash to the trust. Within a given securitization, the master servicer oversees the reporting and
remitting for one or multiple primary servicers responsible for the underlying collateral.
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Monthly Reporting and Remitting Cycle
On a monthly basis, primary servicers provide loan-level data to the master servicer concerning the
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underlying loans in the transaction. We view the master servicers' independent calculation of loan-level
remittance data due to the trust as a best practice. After primary servicers have provided the loan-level data
file, master servicers communicate loan-level discrepancies to the primary servicers. Typical items that the
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master servicer verifies are ending and actual scheduled balances, the total remittance due, as well as the
ending loan count and the number of delinquent loans.
On the applicable remittance date, primary servicers remit principal and interest to the master servicer as
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specified in the operating documents. In some cases, master servicers will draft the remittance directly from
the primary servicers' custodial account. In turn, on the distribution date, master servicers remit principal
and interest to the trustee, paying agent, or other entities that are responsible for distributing cash to bond
holders. The master servicing methodology does not incorporate an assessment of the capabilities of the
bond or securities administrator to distribute cash to bond holders or calculate other relevant transaction
parameters. We view positively master servicers that remit principal and interest based upon the
calculations and assumptions provided by the master servicing system, as opposed to relying solely on the
calculations performed by the primary servicer.
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Loan Boarding and Data Interface with Primary Servicers
In evaluating the reporting and remitting process, we view positively the use of an electronic boarding
interface to minimize the level of manual intervention in the loading of loan-level data from the primary
servicer to the master servicer system. The manual entry of loan-level data to the master servicing system
introduces the potential risk of data quality degradation due to input error. An electronic boarding interface
also provides additional process efficiencies, as it creates a centralized framework for the collection of loan-
level data. We view the use of a web portal interface as a best practice for the uploading of primary servicer
data to the master servicing system. Such an interface provides master servicers with an opportunity to
manage the loan boarding process, while focusing on processing exceptions to the calculations from the
master servicing system. The master servicers' ability to focus on exceptions increases the efficiency of the
reconciliation and reporting process.
Loan-Level Balancing
Upon the loading of data to the master servicing system, loan-level differences can arise between the
master servicer's expectations for the receipt of principal and interest and the amounts that are reported by
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the primary servicer. We view loan-level balancing as an industry best practice. A number of underlying
discrepancies can create such differences including: the interest rate used to determine the remaining
amortization schedule over the life of the loan, the payment amount, the due date, prepayments and
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curtailments, as well as negative amortization. An important source of loan-level differences is the change in
interest rates for adjustable rate mortgages (ARMs). We view positively master servicers that provide a
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detailed analysis of potential rate adjustments to primary servicers prior to the monthly reporting cycle
when such rate differences could impact securitization reporting. The identification of changes in loan
parameters due to ARM loans increases the efficiency of the reconciliation process prior to the publication
of the servicer report at the conclusion of the monthly reporting cycle.
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In addition to providing a reconciliation of data at the loan-level, highly-rated master servicers perform a
comprehensive reconciliation of pool-level data. A pool-to-security reconciliation provides a mechanism to
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ensure that the aggregate principal balance of the security equals the sum of the pool balances. The pool-
to-security reconciliation allows master servicers to identify over- or under-collateralized pools. We view
positively the additional reconciliation of pool-level data. Master servicers that integrate the pool-to-
security reconciliation within their systems allow for additional opportunities to identify non-conforming
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data elements.
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Cash Management
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After balancing loan-level differences, primary servicers remit the principal and interest to the master
servicer on the remittance date. The master servicer obtains these funds via wire transfer, the automatic
withdrawal from the primary servicer's bank accounts, or by other means. As part of the monthly remittance
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cycle, master servicers will perform a loan-level reconciliation of the cash received from primary servicer(s)
to the expectation of cash generated by the master servicing system. In performing a loan-level
reconciliation of cash within a transaction, master servicers account for the amount of principal and interest,
which can be impacted by factors such as ARM changes and incorrect loan balances, among others.
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At the distribution date, the master servicer will remit the cash to the entity responsible for distributing cash
to relevant bond classes. When there is a cash shortfall or exception based upon the data provided by the
primary servicer, a master servicer will identify the amount of the advance needed to cure a shortfall to the
trust. In the case of primary servicer default, the master servicer may be responsible for any servicer advance
which the primary servicer has not remitted to the trust's custodial accounts and the master servicer deems
recoverable.
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Default Management
As part of the monthly reporting cycle, master servicers may provide loan-level oversight for specific aspects
of the primary servicer's default management process. The master servicer can monitor items such as the
primary servicer's approval of loss mitigation decisions, the validation of expense claims, the length of
foreclosure and REO timelines, as well as REO loss analysis. When analyzing the primary servicer's loss
mitigation approvals, the master servicer should take into account the borrower's financial capacity,
willingness to pay, and the feasibility of the solution selected.
The expense claims analysis may include a detailed reconciliation of the charges, fees or advances submitted
by the primary servicer for reasonableness within established tolerances. Master servicers will often utilize
their systems to monitor foreclosure and REO timelines for adherence to industry standards. Master
servicers may also review and analyze each loss incurred at REO liquidation for items such as listing price,
market value and offers accepted to ensure that the severity of loss was minimized. A master servicer's
comprehensive loan-level oversight of the monthly default reporting process can provide additional
protection to the trust.
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Compliance and Monitoring
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We evaluate a master servicer's compliance and monitoring capabilities by analyzing how the master
servicer ensures that primary servicers employ practices that are in-line with industry standards. We assess
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compliance and monitoring capabilities throughout the life cycle of the relationship between the master
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servicer and the primary servicer.
Primary Servicer Approval and Compliance Reviews
The first key milestone is the master servicer's initial assessment of a primary servicer's capabilities. We view
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positively an in-depth assessment of the primary servicer's operational and financial risks prior to the
securitization's closing date. Items that master servicers review as part of their initial approval process of a
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primary servicer include: processes in both the loan administration and default areas; financial statements,
accounting attestations 2, Errors & Omissions policies, internal audits, as well as the details of the primary
servicer's interaction with regulatory bodies. Master servicers also conduct due diligence on any material
litigation. We view positively the integration of the master servicing review within the seller/servicer
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approval process. After an initial primary servicer approval, highly-rated master servicers perform an annual
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compliance review of primary servicers. The compliance review is employed to verify that the initial
conditions in the primary servicer approval process continue to be valid. We view an annual compliance
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review as an essential part of the master servicer's oversight of primary servicers.
Servicer Guide
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A key element of our compliance and monitoring assessment is the master servicer's ability to establish and
reinforce primary servicer operating practices. The use of a Servicer Guide, which describes the processes
that the master servicer requires of the primary servicer, is an essential framework that provides a
comprehensive set of standards against which the master servicer oversees and monitors primary servicers.
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The Servicer Guide clarifies and provides an interpretation of the servicing expectations where transaction
documentation such as Pooling and Servicing Agreements may not stipulate specific actions. The Servicer
Guide details the primary servicer's responsibilities in areas including data delivery requirements, reporting
and remitting procedures, default management practices, as well as claims administration. We consider, as a
best practice, the regular review and updating of the Servicer Guide to reflect present market conditions.
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Accounting attestations can include the Uniform Single Attestation Program (USAP), which is a sampling of a variety of areas within the primary servicing operation
by a third-party accounting firm to provide an assessment of minimum servicing standards. For 2006 securitizations, primary servicers provided an attestation in
accordance with Section 1122 of Regulation AB.
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On-Site Reviews
A master servicer's annual on-site review of primary servicer operations is an effective technique to reinforce
compliance with the provisions of the Servicer Guide. The on-site review allows for an operational
assessment of the primary servicer as a well as an opportunity to perform additional loan-level sampling of
various servicing functions. Loan-level sampling is employed to ensure that the primary servicer is con-
ducting practices in accordance with the Servicer Guide. An on-site review also provides a visual inspection
of operational risks as well as provides an additional forum for the master servicer to establish and maintain
dialogue with the primary servicer's senior management team. The on-site review also permits the master
servicer to identify additional process or procedural risks that are not evident in the monthly reporting and
remitting cycle. The optimal frequency for a master servicer to conduct an on-site review is at least once per
year. Less frequent on-site reviews increase the potential that changes within the primary servicer's
operations could negatively impact transaction performance.
Desk Reviews
A desk review is an additional mechanism for providing oversight of primary servicer operating practices.
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The desk review process involves the master servicer sampling selected loan activity across various primary
servicing functions without an on-site visit. For primary servicers which have periodic interaction with a
master servicer, we see the desk review process as a supplemental level of oversight, and not a substitute for
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on-site reviews. In the case of primary servicers that constitute a nominal portion of the master servicers'
portfolio, the use of desk reviews in-lieu of on-site visits as an oversight mechanism may be appropriate. In
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addition to the reporting and remitting activities within the transaction, the combination of annual on-site
reviews, quarterly desk reviews and annual compliance reviews can provide a strong level of oversight for a
given primary servicer.
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Identifying Primary Servicer Risks
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We assess not only master servicers' performance reviews of primary servicers, but also the methods used
by master servicers to address any identified risks. It is crucial that primary servicer actions which do not
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satisfy the operating procedures outlined in the Servicer Guide or transaction documentation are
communicated to the appropriate personnel and that the master servicer can verify that the shortcomings
have been remediated. We positively view a process whereby outreach to primary servicers is tiered through
various staff levels both within the master servicer and primary servicer on the basis of risk severity. In
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particular, any risk of non-timely reporting and remitting, as well as default-related issues, should be
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elevated. One effective mechanism exhibited by master servicers to address this issue is the use of periodic
meetings between line personnel and senior managers to tier the severity of primary servicing deficiencies.
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Servicing Stability
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The analysis of servicing stability takes into account a number of factors which have an impact on the
master servicing operations as a whole. The servicing stability assessment is similar in many respects to the
analysis that we employ for primary servicers. Financial strength has a strong influence on our view of
servicing stability. In addition to financial strength, we consider a number of factors such as: the master
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servicer's securitization experience, an evaluation of the master servicer's internal control environment, the
ability of the master servicer to provide adequate staffing and training as well as the robustness of the
systems employed by the master servicer to monitor primary servicer performance.
Financial Stability
The financial strength of the master servicer and, where the master servicer is an operating subsidiary within
a holding company structure, its parent corporation, has a strong influence on our view of servicing stability.
The majority of master servicers are unrated affiliates of financial institutions. Our financial stability
assessment incorporates the parent institutions' debt, issuer, and long-term deposit ratings, as applicable. In
determining the level of benefit that the master servicing operations should receive for the parent
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corporation's financial strength, we analyze the level of integration with the parent corporation's existing
business lines as well as the strategic interest of the parent corporation for establishing and maintaining the
master servicing operation. We also focus on the master servicer's mechanisms for funding its operations as
well as its profitability and net worth.
Securitization Experience
We evaluate a master servicer's securitization experience, including an assessment of the performance of its
securitizations relative to expectations on the basis of collateral characteristics. When analyzing
securitization experience, we take into account both the volume of securitizations as a named master
servicer as well as experience with relevant product types, particularly for complex products. From the
perspective of future revenue generation to support the master servicing operations as a going concern, we
analyze the master servicer's securitization experience on the basis of relationships with issuers and
aggregators. To the extent possible, we assess the potential pipeline of securitizations for which the master
servicer is expected to act as a named party on the basis of existing or newly established relationships.
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Master Servicer Independence
The ability of the master servicer to act in the interests o