Fitch Revises RMBS Criteria

Fitch Ratings has announced criteria revisions to ResiLogic, its mortgage default and loss model for U.S. residential mortgage-backed securities.The updated criteria incorporate new assumptions for falling home prices, the poor performance of loans with certain characteristics, and changes in mortgage originations, the rating agency said. The revisions place greater emphasis on regional economic risk, increase default expectations for short-term and hybrid adjustable-rate mortgages, and introduce a new risk category (Low) for borrower income and asset documentation (in addition to the existing categories of Full, Reduced, and None), Fitch reported. Regarding regional economic risk, the rating agency said it will give greater weight to the University Financial Associates default multiplier component of the ResiLogic model because "Fitch believes that the greatest risk to new U.S. RMBS is the continued deterioration of home prices."