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Fitch updates criteria for evaluating losses on RMBS loans

New variables introduced into the formula

Ratings giant Fitch updated its loss modeling criteria for U.S. RMBS loans, according to a new press release from the company.

The model still evaluates the interaction between borrower equity and drops in the value of real estate when determining the potential loss on each loan.

What did change, says Fitch, is the fact that the model now analyzes both agency and non-agency collateral.

The ratings giant writes:

Fitch has introduced three new variables that influence default expectations: number of borrowers, origination channel and liquid reserves. The rating agency has also made enhancements to certain loss severity assumptions and adapted its sustainable home price forecasting methodology to better react to market shifts. The implementation of the updated criteria is expected to result in modestly lower loss assumptions on newly issued prime jumbo MBS pools with strong credit attributes.

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