Fitch has updated its RMBS loan loss model criteria in a move it expects to affect a relatively small percentage of its ratings overall, but that could concentrate those changes in a particular area.
"We expect less than 10% of all ratings outstanding will be directly affected by the model enhancements,” Grant Bailey, head of U.S. Surveillance for Fitch Ratings, said in an email response to a question from this publication about the move’s anticipated affect on ratings. “Of those ratings affected, the majority of revisions are expected to be one category although the rating impact will vary by sector and vintage.”
Fitch said in a press release that specifically, re-REMICs issued in 2009 or earlier and collateralized with 2005-2007 vintage alternative-A residential mortgage-backed securities would likely be affected by the new model’s “more severe treatment of underwater borrowers and more conservative rating stress scenarios.
“Additionally, although prime mortgage loss projections are no expected to change materially, the ratings on prime classes issued prior to 2005 are expected to be more sensitive to the model changes.”
The ratings agency said the model has been expanded to analyze alt-A credit and subprime credit collateral and its home price model has been adjusted to forecast several hundred metropolitan statistical areas in addition to state level forecasts.
Separately, Fitch also said it has updated its re-REMIC criteria, but noted, “There have been no material changes from the prior report.”
