Street Firm Offers Guide.(Credit Suisse Group)

LAS VEGAS -- With loan servicers facing a possibly unprecedented increase in delinquencies and defaults, Credit Suisse is trying to help servicers better understand what they can and cannot do to manage defaults and limit loss exposure.

Credit Suisse is developing a servicer guide, similar to those employed by Fannie Mae and Freddie Mac, to govern acceptable loan sale and servicing parameters. The guide, which may be a first among major Wall Street players in the mortgage securities market, is expected to be delivered later this year.

"As a lot of us know, 'acceptable servicing practices' is very heavily used in the private securities side," said Matthew Kobin, vice president, servicing oversight at Credit Suisse Securities. "We are trying to add meat to that understanding."

Speaking at the Western States Loan Servicing Conference here, Mr. Kobin said that Credit Suisse has a lot of changes going on in the area of servicer surveillance.

He said the seller/servicer guide will help bring transparency to participants in the company's private-label MBS program. One goal is to help servicers understand when they can approach borrowers about a possible loan workout and what workout options are acceptable.

He said the guide should "demystify acceptable servicing practices" at a time when servicers are facing many questions related to the handling of subprime, alt-A and adjustable-rate loans that face payment resets.

The data suggest that servicers will face a growing default management burden. So far, among subprime ARM loans that have faced upward payment resets, about 50%-55% refinance within three months of the reset. Another 8%-12% become at least 30 days delinquent, and the rest continue performing at the new payment level, according to data compiled by Credit Suisse and LoanPerformance.