2011-08-01
Kroll Bond Rating Agency (KBRA) seeks public comment on five publications released today supporting its residential mortgage-backed securities (RMBS) rating process. The reports provide an overview of KBRA's RMBS rating methodology and detailed descriptions of the processes that KBRA will use to evaluate originators, servicers, and results of third-party file reviews, as well as a description of KBRA's loan-level mortgage default and loss model.
Comments should be submitted to rmbscomments@krollbondratings.com on or before September 9, 2011. KBRA seeks comments on all aspects of the methodology and process described from investors, mortgage originators, issuers, arrangers and regulators. Following the review and evaluation of all submissions, KBRA will publish final versions of these documents. Once published, they will make up part of KBRA's RMBS rating methodology.
"By providing complete transparency into our approach and processes, we aim to instill trust in the market and to raise the bar on ratings accuracy," said James Nadler, President and Chief Operating Officer of KBRA. "These publications demonstrate our strong commitment to serving the market through a rigorous evaluation of the collateral as well as key parties in an RMBS, and combine all aspects of our process in an integrated analysis."
Below are the five publications supporting and explaining KBRA's RMBS process:
RMBS Rating Methodology Overview provides a summary of KBRA's RMBS methodology and each aspect of its analytical approach.
Residential Mortgage Default and Loss Model describes the loan-level modeling analysis of mortgage pools, with a focus on pools of newly originated prime-quality mortgages. The report details the various mortgage/borrower attributes that the model considers in projecting default probabilities and loss estimates. The report also details KBRA's approach to determining the amount of loss on the mortgage pool that bonds at each rating category should be able to withstand. This approach is based on projecting home price declines of varying severity. The report provides examples of the effectiveness of the model relative to actual historical default and loss experience from the housing bubble, as well as example results for a representative pool of newly originated mortgages.
Residential Mortgage Originator Review Process and Residential Mortgage Servicer Review Process describe KBRA's review process for mortgage loan originators and servicers. KBRA's review focuses on the business model, strategy, and operational quality of originators and servicers in order to assess their impact on loan quality and performance. KBRA may make adjustments to its rating analysis based on specific aspects of the originator's or servicer's operations and would explain those adjustments in its pre-sale reports.
Residential Mortgage Loan Review Process describes KBRA's approach to evaluating third-party review firms, the scope and results of loan file reviews, and the approach KBRA will take to factoring the results into its rating analysis.
To view all KBRA methodologies, please visit www.krollbondratings.com/ratings/methodologies.
About Kroll Bond Rating Agency
Kroll Bond Rating Agency, Inc. (www.krollbondratings.com) is registered with the SEC as a nationally recognized statistical rating organization (NRSRO). Kroll Bond Rating Agency was established in 2010 to restore trust in credit ratings by establishing new standards for assessing risk and by offering accurate, clear, and transparent ratings.
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Eric Williamson Senior Managing Director 917-281-3280 ewilliamson@krollbondratings.com |
Glenn Costello Senior Managing Director 917-281-3256 gcostello@krollbondratings.com |
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