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TOKYO (Standard & Poor's CreditWire) Oct. 27, 1999--In response
to strong market demand, Standard & Poor's will begin providing
its Servicer Evaluation rankings to the Japanese market. A Standard &
Poor's Servicer Evaluation is an objective and comprehensive
assessment of the servicing abilities of various servicers, including
commercial loan servicers, asset managers, and asset-backed transaction
servicers.
While servicing in the United States has matured, the concept of
third-party servicing is relatively new in Japan. The need for an
objective assessment of servicing quality will expand as servicing in
Japan develops and the number of servicers approved under the Servicing
Law increases. There are currently 24 servicers approved under this law.
Standard & Poor's, the leader in servicer evaluations, has
been offering these for over 10 years, and currently has about 300
rankings.
Servicers can use a Standard & Poor's Servicer Evaluation to
demonstrate to investors and customers the quality of their servicing,
while providing additional comfort in securitization transactions.
Standard & Poor's does not require a Servicer Evaluation for
Japanese securitization, but a ranking could add value to structured
transactions. Investors in structured products benefit from the additional
comfort provided by the ongoing monitoring of the quality and capability
of the servicer. In certain cases, required credit and liquidity
enhancement may be lowered based on the operational strengths of the
original and backup servicers. For example, strong asset management and
foreclosure capabilities may allow for more stable property cash flow and
higher default recovery assumptions. Strong administrative capability
could also mean a shorter servicer replacement transition period and a
reduced liquidity reserve requirement.
A Servicer Evaluation focuses on three key areas, management and
organization, servicing ability and quality, and financial position. After
an in-depth analysis of these elements, an overall ranking of
'Strong', 'Above Average', 'Average',
'Below Average', or 'Weak' will be assigned. To
perform the necessary analysis, a variety of information is required from
the servicer, including:
--An organizational and operational description;
--Managerial resumes;
--Audited financial statements;
--A policy and procedure manual;
--A business plan and financial projections;
--Documentation of a portfolio's insurance coverage;
--A description of accounting and data systems;
--Samples of bank account statements;
--Sample investor reports;
--The most recent tax and insurance report; and
--Details of any substantive pending litigation.
Furthermore, Standard & Poor's will conduct a due diligence
meeting, tour the facility and operational departments, and interview
staff at various levels.--CreditWire
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