Fitch Nixes Indiana High-Cost Loans

Fitch Ratings says it will not rate any residential mortgage-backed securities that contain Indiana high-cost home loans under the state's new High Cost Home Loan Law because assignee liability for such loans is unquantifiable.Fitch said it will now expect sampling for all mortgage loans located in Indiana. The number of loans to be reviewed in the random sample should be the greater of five loans and 10% of the loans in the pool. If the review uncovers any high-cost home loans, then a review of every loan in the pool originated in Indiana is expected in order to comply with the criteria. There are two triggers, including the APR test and the total-points-and-fees test. The APR test is triggered when the annual percentage rate exceeds the yield on U.S. Treasury securities with comparable maturities by 8% for first-liens and 10% for subordinate liens at the time of origination. The total-points-and-fees test is triggered when the sum of the points and fees exceed 5% of the total loan amount for a loan of at least $40,000, or 6% if the loan is less than $40,000.