DBRS Publishes RMBS Insight 1.2: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology

DBRS, Inc. (DBRS) has today published its updated methodology “RMBS Insight 1.2: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology.” This methodology, effective as of the date of this press release, supersedes the previous methodology dated June 9, 2015, under the same title.

The methodology update relates to the analysis and incorporation of the Fannie Mae actual loss data on approximately 400,000 defaulted loans released in July 2015. Similar to the recent Structured Agency Credit Risk (STACR) transactions issued by Freddie Mac, DBRS anticipates that certain Fannie Mae credit risk transfer securitizations will apply actual realized losses on mortgage loans instead of applying loss severity determined by a schedule.

DBRS had previously analyzed the Freddie Mac loss data in its non-agency RMBS Insight 1.2 model in June 2015 and concluded that the loss severity module in RMBS Insight 1.2 performs well on the agency loss data, and there were no adjustments necessary nor any benefit from fitting a model specifically to the agency loss data. This conclusion also holds true after analyzing the actual loss data provided by Fannie Mae.

While no adjustments were necessary to the existing model for analyzing losses, DBRS did update the RMBS Insight 1.2 model to include the capability to evaluate specific deal terms, including the mortgage insurance guaranty for the agency credit risk transfer securitizations.

The update will only affect future rated agency transactions that apply actual realized losses on mortgage loans. No outstanding rated bonds will be affected by such update.

DBRS does not deem the methodology update to be material, and as the model was not changed, DBRS will not issue a request for comment for this update.

Notes:
The full methodology providing additional analytical detail is available by clicking on the link under Related Research at the right of the screen or by contacting us at info@dbrs.com.

DBRS criteria and methodologies are publicly available on its website www.dbrs.com under Methodologies.