Fitch Details Treatment of U.S. Credit Card ABS Servicing Fees.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- With the payment of credit card servicing fees becoming an increasing concern for U.S. asset-backed securities Asset-backed security A security that is collateralized by loans, leases, receivables, or installment contracts on personal property, not real estate. asset-backed security A debt security collateralized by specific assets. investors, Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. explains its treatment of servicing fees in a new report titled 'Credit Card ABS Servicing Fee Adequacy and Priority.' The report details the recent developments, examines the issue of true cost in servicing credit card portfolios, and discusses criteria modifications implemented over the recent past as well as related ratings implications. "From a ratings perspective, assumptions regarding the size and priority of servicing fees are key considerations, as they influence available cash flow and ultimate loss coverage," said Michael Dean, Managing Director, Fitch Ratings. "Changes to those assumptions will have a direct impact on credit enhancement Credit Enhancement A method whereby a company attempts to improve its debt or credit worthiness. Notes: Credit enhancements take many different forms. An example of a credit enhancement would be conversion rights added on to a debt instrument in order to lower the issuing assessments and, in some cases, ratings -- all else being equal." When analyzing the creditworthiness Creditworthiness The condition in which the risk of default on a debt obligation by that entity is deemed low. Creditworthiness Eligibility of an individual or firm to borrow money. of a credit card securitization Securitization The process of creating a financial instrument by combining other financial assets and then marketing them to investors. Notes: Mortgage backed securities are a perfect example of securitization. May also be spelled as "securitisation. , key servicing fee-related considerations should address whether the stated fee adequately compensates an issuer or its backup to service the portfolio and whether cash flow scenarios are being modeled with the servicing fee appropriately positioned in the waterfall. When the stated servicing fee does not adequately cover actual costs, Fitch adopts a higher servicing fee when cash flow modeling and additional credit enhancement is needed in order to cover shortfalls during amortization. 'Credit Card ABS Servicing Fee Adequacy and Priority' is available on the Fitch Ratings web site at 'www.fitchratings.com'. |
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