Fitch Updates Predatory Loan Rating Criteria

Fitch Ratings has revised its random-sample criteria for deciding whether to rate mortgage-backed securities supported in part by home loans from jurisdictions with unlimited assignee liability.Fitch previously indicated that it would not rate any residential MBS containing high-cost home loans from jurisdictions with effective legislation that imposes unlimited assignee liability (such as Kentucky and New Jersey). In order for it to rate an RMBS deal with any loans from such a jurisdiction, Fitch said a third party unaffiliated with the originators must certify that it had conducted due diligence on a random sample of 10%-25% of the loans from the jurisdiction and discovered no high-cost home loans. Under the revised criteria, the number of loans to be reviewed in the random sample should be five loans from each jurisdiction with unlimited liability, or 10% of the loans in the pool from each such jurisdiction, whichever is greater. As before, if the review of the sample uncovers any high-cost home loans, a review of every loan in the pool originated in that jurisdiction will be required in order to comply with the criteria. Fitch can be found online at http://www.fitchratings.com.