Fitch Won't Rate MBS With High-Cost NM Loans

Fitch Ratings will not rate residential mortgage-backed securities containing high-cost loans from New Mexico, the rating agency has announced.Fitch cited potentially unlimited lender and assignee liability on high-cost loans as the reason for its decision. New Mexico's predatory-lending law took effect Jan. 1. New Mexico's law has a safe-harbor provision, but Fitch said the provision is unclear on what constitutes reasonable due diligence. "Fitch will not rate any transactions containing loans originated in New Mexico after the effective date of the act where the seller or purchaser cannot provide adequate evidence that the particular transaction will have the benefits of the aforementioned safe harbor because of its concern that a lender may originate a high-cost loan in error, thereby subjecting the transaction to unlimited liability," Fitch said. Rival rating agency Standard & Poor's announced in November that it would continue rating RMBS transactions with high-cost loans from New Mexico. Fitch can be found online at http://www.fitchratings.com.