Fitch Won't Rate Deals With GFLA Loans

Fitch Ratings has announced that it will not rate mortgage-backed securities deals containing mortgage loans covered by the Georgia Fair Lending Act, but said it would, under certain circumstances, rate deals with loans covered by predatory lending laws in other states.The unlimited assignee liability imposed by GFLA, which affects "high-cost" loans and subprime lending, has "caused significant disruption" in the residential MBS market, Fitch said, because it could result in losses to securitization trusts that "cannot be determined or estimated in advance." Predatory lending laws that place a cap on possible losses -- such as the soon-to-be-effective New York State Lending Act and pending amendments to the New Jersey State Lending Act -- do not present as great a problem for MBS deals containing loans covered by those laws, Fitch said. The rating agency said it would analyze each situation based on the provisions of each law. Fitch's announcement followed a recent decision by Standard & Poor's not to rate any structured finance deal that contains conforming-balance mortgage loans or manufactured housing loans covered by the Georgia law. More recently, Moody's Investors Service reported that it will heighten its scrutiny of such loans. Fitch can be found online at http://www.fitchratings.com.