Business News

STAR Program Evolving with the Times

By Don Geiger | April 5, 2016

STAR Program Evolving with the TimesFannie Mae’s Servicer Total Achievement and Rewards (STAR) program is now evolving to provide a greater focus on the operational performance of loan servicers and deliver more information to Fannie Mae’s servicing partners.

“We’re leveraging STAR’s proven strength in credit performance and servicer performance management to make the program more robust by providing more information about servicer capabilities,” says Kurt Reheiser, Fannie Mae’s vice president – servicer performance solutions.

“The changes represent an evolution of the program in response to the improved mortgage delinquency environment. And they demonstrate our renewed focus on partnering with our servicers to continue to promote servicing excellence,” he says.

Fannie Mae introduced the STAR program in 2011 to monitor and improve how servicers help keep borrowers in their homes and reduce credit losses.

By 2014, some servicers had reduced the number of delinquent loans to a point where they no longer qualified for a performance scorecard or STAR rating. In response, Fannie Mae created a new designation called STAR Performer. It recognizes servicers for excellent performance even when their delinquent loan population is not large enough to include them in the full scope of the STAR program.

Under this year’s enhancements, STAR measures performance on services affecting all borrowers, not just those who are delinquent. The changes include adding 10 operational performance metrics to the existing seven credit-performance metrics on the STAR scorecard. And STAR has a broader focus across the categories of general servicing, solution delivery, and timeline management.

“The updated STAR framework will support more servicers in their efforts to focus on operational excellence. It will measure how the selected servicers are performing in each of these categories,” says Caroline Patane, Fannie Mae’s vice president – servicer reviews and measurement.

Transforming the Scorecard

“We wanted to transform the scorecard to be more comprehensive and give more information about performance metrics across the entire loan lifecycle, including current loans,” Reheiser says. “We wanted to make sure that we’re measuring the experience of current borrowers as well.”

There are operational metrics on the scorecard to measure the experiences of both current borrowers and those seeking guidance on mortgage delinquencies. These include the average time servicers take to answer phone calls from borrowers. The metrics also show the percentage of calls that go unanswered before callers disconnect.

“To get good loss-mitigation performance, you need a good back-end process,” says Reheiser. “But you also need to be providing excellent customer service to borrowers that are current. So some of the additions to the scorecard were natural extensions to the loss mitigation measures we already had in place.”

Statistical Analysis

Delinquency rate improvement and industry consolidation of delinquent loan servicing drove many of this year’s changes. Input from servicers who wanted the scorecard to measure their efforts to improve the experience of all borrowers was another factor.

“This allows the STAR performance framework to measure a larger population of servicers,” says Reheiser. “It enhances Fannie Mae’s credit loss management capabilities while providing more competitive intelligence for its servicers.”

Patane says the updates have come in response to the company’s changing portfolio makeup and changes in the servicing industry.

“There are definite signs of improvement and recovery in the housing market,” she adds. “We’re starting to see that servicers have taken appropriate actions to work with homeowners to stem their delinquencies sooner. That gives us an opportunity to evaluate them a little differently than we did at the height of the crisis.”

Using Information to Improve

The updates to STAR take advantage of the program’s proven strength in credit performance and servicer performance management, Reheiser says.

“We’re making the program more robust and giving our servicing partners more information about their performance,” he says. “In addition, servicers have a better view into how they compare with their competitors in key metrics.”

“Servicers that want to set the bar high and be leaders in the industry can use this information to know where they stand and where they need to improve.”

Don Geiger is a freelance writer based in Dallas.