OREANDA-NEWS. Fitch Ratings has updated its criteria report 'Canadian Residential Mortgage Loan Loss Model Criteria.' The report updates and replaces the report with the same title dated May 2014. The criteria report summarizes Fitch's current criteria for estimating losses on Canadian residential mortgage loans collateralizing covered bond programs as well as Residential Mortgage Backed Securities and Asset Backed Commercial Paper facilities.

The criteria remain fundamentally unchanged, and there is no impact on the outstanding Canadian covered bonds currently rated by Fitch. The update satisfies requirements for annual criteria review, but Fitch is currently in the process of gathering updated performance data for a full update to the model criteria, intended to be released in the 3rd Quarter of 2015. This review will incorporate a broader dataset including more years of observed performance, and will re-evaluate the relationships between loan characteristic and default using an updated regression analysis.

Key drivers of the model include:
--Sustainable loan-to-value ratios, reflecting both changes in house prices since origination and Fitch's projected market value declines based on the agency's proprietary Sustainable Home Price model.
--Other borrower and loan attributes including credit score, total debt service ratio, loan purpose, occupancy and property type.
--Loan interest, legal costs, sales commissions, and other expenses associated with maintenance and upkeep of the property during the liquidation period, analyzed as part of an accounting-based loss severity framework which determines total proceeds available to investors upon liquidation.