Fitch Ratings today published an updated criteria report that focuses on Fitch's methodology for analyzing the credit risk of mortgage real estate investment trusts (REITs) that own direct or indirect interests in mortgages on real estate or other interests in real property. The report, titled, 'Criteria for Rating U.S. Mortgage REITs and Similar Finance Companies,' updates and replaces a report of the same title dated Feb. 27, 2012.
Fitch's credit ratings for mortgage REITs are based on qualitative factors such as the company's business model, servicing capabilities, asset quality, management and governance, track record, and operating history. Quantitative factors include funding options, funding diversity, leverage and capitalization, unencumbered asset coverage, capital market access, dividend payout ratios, and operating performance.
Funding diversity and financing strategy, liquidity, and unencumbered asset quality are typically major obstacles in a mortgage's evolution toward achieving investment-grade ratings. Mortgage REITs typically have a soft cap of the 'BBB' rating category.
The full report is available on Fitch's web site at 'www.fitchratings.com'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Criteria for Rating U.S. Equity REITs and REOCs' (Feb. 26, 2013);
--'Treatment and Notching of Hybrids in Nonfinancial Corporate and REIT Credit Analysis' (Dec. 13, 2012);
--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012).