Fitch Undertakes Comprehensive Review Of Subprime Mortgage Transactions.Business Editors NEW YORK--(BUSINESS WIRE)--March 24, 2003 Subprime mortgage 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. has grown from $63.7 billion in 1997 to over $160 billion in 2002. The 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. Performance Analytics team monitors over 875 subprime, 147 manufactured housing Manufactured housing (also known as prefab housing) is a type of housing unit that is largely assembled in factories and then transported to sites of use. In the United States, the term "manufactured home" specifically refers to a house built entirely in a protected , and more than 150 net interest margin (NIM nim 1 tr. & intr.v. nimmed, nim·ming, nims Archaic To steal; pilfer. [Middle English nimen, to take, from Old English niman; see ) transactions. In response to the overwhelming issuance of subprime mortgage transactions over the past several years, Fitch has placed additional focus and resources on its surveillance process. The review process for all subprime bonds currently monitored by Fitch has been upgraded and will allow Fitch to be particularly proactive on rating actions. Fitch has begun its review with the earliest vintage transactions and plans to complete its review by year-end. Every subprime, manufactured housing and NIM bond currently rated by Fitch will be reviewed and affirmed, upgraded or downgraded, as necessary. The analysis includes a performance review that incorporates numerous variables. Since subprime transactions typically use excess spread as the first level of loss coverage, valuing excess spread is critical. As the value of excess spread is highly dependent on the speed at which the remaining collateral prepays in addition to the timing of loss allocations, Fitch makes certain assumptions about the future behavior of both factors. In addition to using information from remittance Money sent from one individual to another in the form of cash, check, or some other manner. Financial statements sent by a creditor to a debtor frequently refer to the process of submitting a monthly remittance. REMITTANCE, comm. law. reports, Fitch analysts work closely with the involved servicer to determine appropriate loss severity and cure rate data, as well as make accurate assessments regarding delinquency, foreclosure foreclosure Legal proceeding by which a borrower's rights to a mortgaged property may be extinguished if the borrower fails to live up to the obligations agreed to in the loan contract. , real estate-owned (REO reo Noun NZ a language [Maori] ) timelines. Fitch also considers the quality of the remaining collateral as well as any unique structural features. This analysis is used to determine the appropriate ratings changes, up, down or affirmed. In addition, as part of its ongoing analysis, Fitch identifies transactions which are performing outside of original expectations through an internal screening process which monitors numerous performance variables. These variables include prepayment, delinquency and loss tests as well as overcollateralization requirements. Transactions that meet Fitch's screening criteria, are identified on its monthly Priority Review list. Once identified, further analysis is then performed to assess the impact of losses and prepayments on available 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 and accordingly on certificate ratings. While the industry is challenged with worsening performance, Fitch is endeavoring to provide an even higher quality level of surveillance to the investor community. |
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