Fitch Launches Criteria for Reps & Warranties for U.S. RMBS

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has introduced criteria for representations and warranties (reps & warranties) in U.S. RMBS transactions that lists reps & warranties needed in RMBS transaction documents in order for Fitch to rate the transaction. The report also addresses the financial strength needed of the provider of the reps & warranties.

Fitch has divided the list of reps & warranties in RMBS transactions into two categories: Tier I and Tier II. Tier I are reps & warranties in which every RMBS transaction must include in order for Fitch to rate the transaction. Tier II are additional beneficial reps & warranties. If these are not present, the transactions could be rated by Fitch if sufficient credit enhancement is present. Adequacy of credit enhancement for lack of Tier II reps and warranties will be evaluated on a case-by-case basis.

Typically, the originator of the mortgage loans gives reps & warranties as of the closing date in RMBS transactions. If any of the reps & warranties is discovered to be not true, the provider of the reps & warranties must repurchase the loan out of the trust at the full outstanding principal balance of the mortgage loan plus any accrued interest. Therefore, it is critical for the provider of the reps & warranties to have the financial capacity to repurchase loans. The entity providing the reps & warranties will need to be an entity with a rating of at least 'BBB' or better by Fitch or have an acceptable internal assessment by Fitch in order for the agency to rate the RMBS transaction.

'U.S. Residential Mortgage Loan Representations and Warranties Criteria' is available at www.fitchratings.com under the following headers:

U.S. Structured Finance >> RMBS >> 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.