Fitch Updates Canadian RMBS Loan Loss Criteria
The criteria remain fundamentally unchanged, and there is no impact on the outstanding Canadian covered bonds currently rated by Fitch. The update incorporates a broader dataset including more years of observed performance, and updates the relationships between loan characteristics and defaults using an updated regression analysis.
Key drivers of the model include:
--Sustainable loan-to-value ratios, reflecting both changes in house prices since origination and Fitch's projected market value declines based on the agency's proprietary Sustainable Home Price model.
--Other borrower and loan attributes including credit score, total debt service ratio, loan purpose, occupancy and property type.
--Loan interest, legal costs, sales commissions, and other expenses associated with maintenance and upkeep of the property during the liquidation period, analyzed as part of an accounting-based loss severity framework which determines total proceeds available to investors upon liquidation.