Fitch Tweaks MI Model

Fitch Ratings, New York, has revised its mortgage insurer capital model. Some of these changes correspond to changes made by the U.S. Residential Mortgage-Backed Securities Group to its mortgage default and loss model.Fitch is increasing the default probability in its MI capital model by 20%. It will also be applying a 100% capital charge to all illiquid equity investments. The model will also now recognize a greater level of reinsurance credit as a partial offset to the higher level of gross losses. Fitch said this is an interim step in the development of an updated model for U.S. mortgage insurers. Fitch said there is the potential that some of the MIs will not have the level of capital for their current rating. Where any downgrades occur, it is expected to be only on notch. Fitch is reviewing the ratings of any companies affected by the model revisions and expects to provide updates within two weeks.