Fitch Releases New Loan Level Due Diligence Grading Methodology, Tells TPR Firms to Refer to SFIG

On Monday, June 27th, Fitch Ratings announced new loan level due diligence grading methodology including a realignment of items driving “C” and “D” grades and compliance grading for Truth in Lending Act (“TILA”) – Real Estate Settlement Procedures Act (“RESPA”) Integrated Disclosure (“TRID”) rule errors and exceptions. Fitch has requested that third party review ("TPR") firms use 'A' through 'D' grades when reporting diligence findings on credit, property, and compliance reviews for RMBS transactions. Details of the grading scale can be found in its press release.

According to the release, when reviewing loans for specifically for TRID compliance, Fitch expects TPR firms to determine whether the loans were originated and closed in compliance with TRID. TPR firms should detail their findings and assessments consistent with SFIG’s RMBS 3.0 TRID Compliance Review Scope©, published earlier this month. In its criteria update Fitch requests that TPR firms determine whether any findings are deemed more likely to carry 1) statutory damages and assignee liability or 2) assignee liability only.

The underlying premise of SFIG’s TRID documentation was to establish a best practices approach to pre-securitization testing logic that will drive the due diligence conducted by TPRs. Given the interest in this work, SFIG has subsequently made the document available for purchase by non-members, which can be ordered here.

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