Changes to the Tier Ranking System (TRS)

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Round 34 through 37 - No changes to formula or benchmarks. Servicers ranked Tier 1 during Round 34 are eligible for increased incentives per ML 09-04.

Round 33 - For Loss Mitigation Retention claims, HUD now uses the date the claim was processed, and no longer uses the date the claims was paid, as the date of record for TRS calculation. Similarly, for terminations (PFSs, DILs, ACDs, and FCs), HUD now uses the date the claim was processed, and no longer uses the FHA insurance termination date as the date of record for TRS calculation.

Round 15 through 32- No changes to formula or benchmarks. Servicers ranked in Tier 1 during...

	...Round 30 are eligible for increased incentives per ML 08-05.
	...Round 26 are eligible for increased incentives per ML 06-31.
	...Round 20 are eligible for increased incentives per ML 05-47.

Round 14 - The formula for Round 14 remains unchanged from Round 12 . The benchmarks for Round 14 were established by averaging all the workout ratios of the lenders that met the tier ranking formula requirements (lenders with 11 or more foreclosures) during the Round 13 ranking period. There were 121 lenders whose workout ratios were used in calculating the average. The average workout ratio for Round 13 was 59.51 percent which established the mean. From the mean, HUD then added 20 percentage points to establish the benchmark from Tier 1 to Tier 2 and subtracted 20 percentage points to establish the benchmark from Tier 3 to Tier 4.

Ranking Benchmark:

Tier	Ratio Benchmark
1	Greater than 0.79999
2	0.60 to 0.79999
3	0.40 to 0.59999
4	Less than 0.40

Round 13 - Unchanged from Round 12

Round 12 - In Round 11, servicers were notified that Accelerated Claims Disposition (ACD) claims would be counted as another loss mitigation tool beginning in Round 12. The only change in Round 12 was the addition of the ACDs into the TRS formula.

Formula:

Rounds 7 through 11 - Unchanged from Round 6

Round 6 - Based on continuing feedback from servicers and the desire to move closer to a standard industry-recognized work out formula, HUD implemented significant changes to methodology, formula, and benchmarks:

	TRS formula was changed to the work out ratio by adding forbearances and loss mitigation claims to the denominator.
	A maximum of one loss mitigation event (FB, SF, MM, PC, PFS, DIL) per loan, per servicer, per ranking period was allowed.
	All foreclosures are counted.
	Servicers whose HUD approval had been terminated more than six months prior to the start of the review period were excluded from ranking.
	Benchmarks were changed to account for the change of the formula to a workout ratio.
	Formula:

FBs + SFs + MMs + PCs + PFSs + DILs

FBs + SFs + MMs + PCs + PFSs + DILs + FCs

	Servicers with less than 11 foreclosures and a Tier 3 or 4 ratio.
	Servicers whose HUD approval had been terminated more than six months prior to the start of the review period were excluded from ranking.

Ranking Benchmark:

Tier	Ratio Benchmark
1	Greater than 0.79999
2	0.55 to 0.79999
3	0.15 to 0.54999
4	Less than 0.15

Rounds 4 & 5 - Unchanged from Round 3

Round 3 - After Round 2, several changes were made in the TRS calculation methodology:

	Credit provided to servicers who had reported a forbearance plan in HUD's SFDMS where no special forbearance claim had been filed, to allow credit for formal forbearance plans.
	Servicers who had filed no foreclosure claims but had filed loss mitigation claims or had forbearances reported in the SFDMS were automatically included in Tier 1.
	Servicers with less than 11 foreclosures and a Tier 1 or 2 ratio were ranked in their appropriate Tier.
	Servicers with less than 11 foreclosures and a Tier 3 or 4 ratio were not ranked.
	The TRS formula was changed to exclude PFSs and DILs from the denominator, giving servicers full credit for these loss mitigation tools.
	Formula:

SFs + MMs + PCs + PFSs + DILs + Net FBs

FCs

Excluded: Servicers with less than 11 foreclosures and ranked in Tier 3 or 4 were classified outside of TRS parameters.