Fitch Updates U.S. RMBS Loan Loss Model Criteria

NEW YORK--()--Fitch Ratings has updated its criteria for estimating losses on U.S. mortgage pools for RMBS transactions, 'U.S. RMBS Loan Loss Model Criteria.'

The core principle of the framework remains the interaction between borrower equity and market value declines in determining expected loss for each loan. In addition, the methodology accounts for both loan level attributes and macroeconomic factors in deriving loss expectations.

While the model's core methodology has not changed, Fitch's criteria update includes several enhancements from the previous version.

The criteria now includes a treatment for loans with mortgage insurance (MI) in risk-sharing transactions issued by the Government Sponsored Enterprises (GSE). Risk-sharing transactions issued by the GSE's may benefit from an MI backstop by the GSEs guaranteeing the full payment of all eligible MI claims. Fitch will assume all eligible claims are paid for loans benefitting from MI with a GSE backstop.

The treatment of retail loans from originators that Fitch has not reviewed has also been revised. Previously, Fitch typically withheld the probability of default benefit for retail loans from unreviewed originators. Fitch will now apply the retail benefit to unreviewed originators where a satisfactory due diligence sample indicates a reliable channel designation for that originator.

For RMBS pools issued since 2009, the revisions will likely result in modestly lower projected losses. Fitch expects to review all outstanding RMBS potentially affected by the changes within the next 6 months. Fitch does not expect any rating revisions as a result of the criteria update.

'U.S. RMBS Loan Loss Model Criteria' is available at 'www.fitchratings.com' or by clicking on the above link.

Additional information is available at 'www.fitchratings.com'.

U.S. RMBS Loan Loss Model Criteria

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=868923

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Contacts

Fitch Ratings
Grant Bailey
Managing Director
+1-212-908-0766
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Sean Nelson
Director
+1-212-908-0207
or
Stefan Hilts
Director
+1-212-908-9137
or
Media Relations:
Alyssa Castelli, +1 212-908-0540
alyssa.castelli@fitchratings.com

Contacts

Fitch Ratings
Grant Bailey
Managing Director
+1-212-908-0766
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Sean Nelson
Director
+1-212-908-0207
or
Stefan Hilts
Director
+1-212-908-9137
or
Media Relations:
Alyssa Castelli, +1 212-908-0540
alyssa.castelli@fitchratings.com