Fitch Will Still Rate Cleveland Loans

Fitch Ratings has announced that it will continue to rate residential mortgage-backed securities that include mortgage loans originated in Cleveland and covered by the city's predatory lending ordinance.The move comes after the Court of Appeals of Ohio reinstated the city's predatory lending ordinance by staying the lower court's prior ruling that had found the ordinance to be unconstitutional. It is uncertain from the motions filed in the case whether the law in effect is the first ordinance the city passed or the second ordinance containing the amendments. Either way, there are no explicit civil penalties or assignee liability provisions in the ordinance, which is why Fitch revised its rating criteria in the wake of predatory lending legislation. The company had said it would not rate RMBS transactions containing loans produced in jurisdictions that have passed laws that could result in unlimited purchaser or assignee liability for the predatory lending practices of an originator, broker, or servicer. "The penalty cannot be assessed by the assignee, and there is no additional liability," said Michael Nelson, senior director of structured finance for residential mortgages at Fitch. "The ordinance simply prohibits predatory lenders from doing business with the city."