Fitch to Rate Deals With Georgia Loans

Fitch Ratings has announced that it will resume rating residential mortgage-backed securitizations that include mortgage loans originated after the recent amendments to the Georgia Fair Lending Act.The rating agency said it believes it can quantify the risk associated with GFLA's remaining assignee liability, but cited concerns about certain provisions relating to "high cost home loans." Fitch said it will now rate RMBS pools that include high-cost home loans (as defined in GFLA) originated in Georgia, "subject to the application of additional credit enhancement due to potentially high loss severity." Under the amended statute, an assignee holding a high-cost home loan may be subject to no liability if it can prove that it exercised "reasonable due diligence" to prevent the purchase of such a loan. The maximum liability -- the outstanding indebtedness on the loan, plus reasonable attorneys' fees -- can be incurred if the assignee is unable to prove such due diligence. Fitch said it is concerned about the absence of guidance on what actions will be deemed "reasonable due diligence," and the possibility that a loan not initially considered high-cost could ultimately be viewed as such. Standard & Poor's and Moody's recently announced that they would resume rating RMBS containing Georgia mortgage loans. Fitch can be found online at http://www.fitchratings.com.