Fitch: SFIG's Proposed U. S. RMBS 3.0 Reps Seen as Positive
OREANDA-NEWS. The proposed representations and warranties (R&Ws) included in the Structured Finance Industry Group's (SFIG) RMBS 3.0 initiative would be an improvement to current practices if accepted by the U. S. RMBS market, according to Fitch Ratings.
The proposal includes up to four categories for each rep with each category containing slight variations to reflect feedback from market participants or to address different loan characteristics. After completing a comparison of the language in each proposed variation to the reps listed in Fitch's current criteria, Fitch views all proposed categories for every rep as consistent with its criteria or credit positive. A notable proposed improvement is fewer 'knowledge' qualifiers, which Fitch believes will result in a stronger R&W framework. Fitch recognizes that the presence of a knowledge "clawback" is a potential mitigant for a knowledge qualifier.
Fitch does not plan to revise its existing criteria as currently described in its 'U. S. RMBS Master Rating Criteria' until the SFIG rep proposal becomes more widely adopted in US RMBS transactions. However, if included in a transaction, the currently proposed reps would be deemed as acceptable to Fitch.
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