S&P Bars IN High-Cost Loans From Deals

Citing liability issues, Standard & Poor's Ratings Services has announced that it will not permit "High Cost Home Loans" governed by the Indiana Home Loan Practices Act into its rated structured finance transactions.Under that law, purchasers and assignees may be subject to indeterminate liability on loans defined as high-cost that are originated on or after Jan. 1, 2005, S&P said. With respect to all Indiana home loans, the act permits a borrower to rescind a loan in accordance with the federal Truth in Lending Act for "a violation of law." Because the exposure of purchasers is quantifiable, Indiana home loans not defined as high-cost may be included in S&P's rated transactions. However, S&P said it is unclear whether the phrase "a violation of law" refers to a violation of the act itself, a violation of TILA, or a violation of any other law, state or federal. "It is not feasible for Standard & Poor's to review all laws to determine whether such laws have clear and objective standards for compliance," the agency said. Therefore, S&P said it will require additional credit enhancement for Indiana home loans originated by national banks and their operating subsidiaries, federal thrifts, and state-chartered banks on or after Jan. 1. S&P can be found online at http://www.standardandpoors.com.