Fitch Ratings: SFIG Reps and Warranties Proposal A Positive

Fitch Ratings has determined that the proposed representations and warranties included in SFIG’s RMBS 3.0 Third Edition Green Papers would be an improvement to current practices if accepted by the U.S. RMBS market, according to a recent press release. As reported by SFIG last November, the latest edition of the Green Papers series included the addition of 39 model representations and warranties, as well as a range of proposed standardized constructs. That release completed the full framework of 47 representations and warranties.

According to Fitch:

After completing a comparison of the language in each proposed variation to the reps listed in Fitch's current criteria, Fitch views all proposed categories for every rep as consistent with its criteria or credit positive. A notable proposed improvement is fewer 'knowledge' qualifiers, which Fitch believes will result in a stronger R&W framework. Fitch recognizes that the presence of a knowledge "clawback" is a potential mitigant for a knowledge qualifier.

Fitch has indicated it does not plan to revise its existing criteria per its U.S. RMBS Master Rating Criteria until SFIG’s framework becomes more widely adopted, but would deem it acceptable if the proposed reps were included in a transaction.

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