Ratings agency Fitch on Wednesday issued an opinion on a recent jumbo transaction it did not rate, saying the loan quality and originator are strong, but due to geographic concentration risks it would have required between 9%-10% AAA credit enhancement rather than the 7.6% level it had.
“To be clear the [loan] product is very, very strong,” said Roelof Slump, a managing director in Fitch’s residential mortgage-backed securities group, of the collateral in the transaction, NRP Mortgage Trust 2013-1. “It is a really good, quality pool.”
First Republic Bank is “a very high quality originator with a lot of experience” and this “does benefit the transaction over time,” he said in an interview with this publication Wednesday.
“The risk that we wanted to highlight really has to do with concentration,” he said, noting that nearly 75% of the loans in the deal are located in California with some further concentrations in metropolitan statistical areas such as San Francisco and San Diego.
A call to an analyst listed on the presale report for the deal at
From time-to-time, some ratings agencies will issue what are sometimes called “hostile ratings” on deals they examine but have not been chosen to rate. Proponents of the practice argue that it can help provide an unbiased view of the transactions in question, given that the opinion is provided without payment, and regulatory reform has moved in this direction. But detractors argue that the move is still biased in that it may stem from competition between rating agencies.
