Fitch Ratings Announces Change To NIMS Criteria.Business Editors NEW YORK--(BUSINESS WIRE)--Nov. 5, 2002 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. has reviewed recent changes in the regulatory and statutory treatment of prepayment penalty Prepayment penalty A fee a borrower pays a lender when the borrower repays a loan before its scheduled time of maturity. charges and analyzed an·a·lyze tr.v. an·a·lyzed, an·a·lyz·ing, an·a·lyz·es 1. To examine methodically by separating into parts and studying their interrelations. 2. Chemistry To make a chemical analysis of. 3. the risks these changes pose for the ultimate enforcement of those charges by servicers of sub-prime and home equity mortgage loans. In response to these changes, Fitch has amended its criteria with regard to the recognition of prepayment penalty charges pledged to Net Interest Margin Securitizations (NIMS NIMS National Incident Management System (US Department of Homeland Security) NIMS National Institute for Materials Science (Japan) NIMS Near-Infrared Mapping Spectrometer ). Going forward, Fitch will recognize projected prepayment penalty charges pledged to NIMS for the earlier of: (1) the first 24 months of the transaction or (2) until the period excess interest or residual cash flow generated by the underlying transactions under Fitch's stress scenario ceases. Prior to this change, Fitch recognized projected prepayment penalty charges pledged to NIMS for the entire period in which they were in force under the terms of the mortgages. Discounts applied to the projected prepayment Prepayment 1. The payment of a debt obligation prior to its due date. 2. The excess payment over a scheduled debt repayment amount. Notes: 1. Examples include deferred expenses such as rent and early loan repayments. 2. charges will not currently be affected by this change. This change is likely to result in a reduction in the size of NIMS notes that are backed by transactions collateralized by mortgage loans with prepayment penalty charges lasting greater than 24 months. NIMS backed by transactions that are collateralized by mortgage loans with prepayment penalty charges that do not exceed 24 months should not be affected by this change. This criteria change is effective for all proposed NIMS and whole-loan bids made after Nov. 11, 2002. 'Because Fitch's rating criteria is the standard used by firms for establishing sub-prime mortgage whole loan prices that are dependent on NIM nim 1 tr. & intr.v. nimmed, nim·ming, nims Archaic To steal; pilfer. [Middle English nimen, to take, from Old English niman; see execution, we felt it was necessary to provide market participants The term market participant is used in United States constitutional law to describe a U.S. State which is acting as a producer or supplier of a marketable good or service. When a state is acting in such a role, it may permissibly discriminate against non-residents. sufficient opportunity to adjust to this change,' said Tom Albertson, Senior Director, Fitch Ratings. 'NIMs: Rating and Analysis of Mortgage Residual Cash Flows' can be found on the Fitch Ratings web site at 'www.fitchratings.com' in the 'RMBS' section under 'Criteria Reports'. A copy of the report can also be obtained by contacting the Ratings Desk at 1-800-893-4824. |
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