Archive: 18 March 2014

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Non QM Lending Facilitated by New Fitch Ratings Criteria

Non QM Lending Facilitated by New Fitch Ratings Criteria

By: Laurence E. Platt

Non-QM lending received a big boost this week when Fitch Ratings issued its criteria for analyzing residential mortgage-backed securities (“RMBS”) under the Ability to Repay (“ATR”) and Qualified Mortgage (“QM”) rules issued by the Consumer Financial Protection Bureau. It announced that it would apply a relative “credit enhancement” adjustment (i.e., extra collateralization) to non-QM loans pooled to back RMBS, but the level of credit enhancement reflects its belief that the risk of massive losses on such loans is relatively slight. In reliance upon required third-party due-diligence reviews, Fitch said that it would assume the accuracy of an originator’s designation of loans as “safe harbor” QM loans, higher-priced QM loans or non-QM loans. Read More

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