Fitch to Seek Third Party Due Diligence for New U.S. RMBS

NEW YORK--(BUSINESS WIRE)--Poor underwriting quality during mortgage loan origination was one of the major causes of the severe underperformance in U.S. RMBS over the past two years, according to Fitch Ratings, which will now seek and evaluate third-party loan-level reviews on all residential mortgage pools that Fitch is asked to rate in order to better identify poor underwriting practices.

The reviews will be conducted by a 'due diligence' company prior to Fitch providing a rating on the transaction, as detailed in new criteria for reviewing third-party residential loan reviews.

A review company will be an independent company with no ties to the loan originator, the issuer of the notes, or the security underwriter. It will need to have the appropriate company and management experience for the type of loans being reviewed and have the procedures and controls, staff experience levels, technology, and tools to adequately conduct and report on the reviews described in this report.

The review company will have its employees inspect the loan files and loan data tape and will provide Fitch with a report that details all instances where the review determines that a loan was originated and underwritten outside the stated guidelines of the originator's loan origination program. Additionally, the review is expected to detail any underwriting information that is missing or different to certain minimum standards outlined below.

'U.S Residential Mortgage Third Party Loan Level Review Criteria' is available at www.fitchratings.com under the following headers:

U.S. Structured Finance then RMBS then Special Reports

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.