Moody's to Rate RMBS With NY Loans

Moody's Investors Service has announced that New York State home loans originated after April 1, 2003 -- the effective date of the state's predatory lending act -- may be included in residential mortgage-backed securitizations without increasing risk to investors as long as they are not "high-cost" loans.Moody's said the inclusion of small amounts of high-cost loans in RMBS would be considered on a case-by-case basis because of increased risk. Christine Lachnicht, a Moody's vice president and senior analyst, said the New York law provides clear standards that define the threshold between home loans and high-cost loans that should enable lenders to establish effective compliance procedures. Moreover, the act limits assignee liability for noncompliant high-cost loans. The rating agency said New York home loans may be included in securitizations without adverse credit impact if the issuer demonstrates adequate procedures to ensure compliance with the act. "Generally speaking, a high-cost loan transaction could pass muster if 2% of the pool or less consists of New York high-cost loans that fit neatly within clear, objective standards for compliance," Ms. Lachnicht said. Moody's can be found online at http://www.moodys.com.