On Jan. 25, 2019, S&P Global Ratings published its "Global Methodology And Assumptions: Assessing Pools Of Residential Loans" (global RMBS criteria). The global RMBS criteria apply to the analysis of residential mortgage-backed security (RMBS) and covered bond transactions in the jurisdictions that fall within the scope of the criteria. Below we answer some frequently asked questions (FAQs) relating to the global RMBS criteria. The FAQs are designed to be read in conjunction with "Global Methodology And Assumptions: Assessing Pools Of Residential Loans."
Frequently Asked Questions
Do the global RMBS criteria cover all the jurisdictions where S&P Global Ratings has outstanding RMBS ratings or covered bond ratings backed by residential assets?
The global RMBS criteria apply to all jurisdictions with some exceptions. In addition to the jurisdictions named in the article, the global RMBS framework applies to all jurisdictions where we have yet to rate RMBS or covered pools. The criteria do not apply in jurisdictions where we have separate published RMBS criteria, nor do they apply in jurisdictions where we currently rate transactions using "Principles Of Credit Ratings," published Feb. 16, 2011. However, over time, we plan to move most other jurisdictions into the global RMBS framework, and at the time of writing, we have a Request for Comment in relation to moving the Netherlands, France, and Belgium over to the global RMBS framework.
What is the global RMBS criteria and how do the criteria differ from the guidance?
The global RMBS criteria provide an overarching analytical approach to rating pools of residential assets. Where necessary, the application of the global RMBS criteria in certain jurisdictions is detailed in the accompanying guidance document. For information regarding the difference between criteria and guidance see "What Are Rating Criteria," published Dec. 15, 2017.
The decision to publish guidance is based on a number of factors including market interest, but regardless of the jurisdictions included in guidance, the scope of the global RMBS criteria remains global. For some jurisdictions, in place of published guidance, we will outline our application of the criteria in our transaction publications.
How long would it take S&P Global Ratings to apply the global RMBS criteria to a jurisdiction in scope of the criteria for the first time?
When we are considering a jurisdiction where we have yet to apply the global RMBS criteria, the key factors that determine the time it takes for us to formulate our application are the extent and sufficiency of the information available to us. Assuming that sufficient data are available, we generally expect to be able to formulate the application of the global RMBS criteria in four-to-eight weeks.
What is a Mortgage Market Assessment (MMA)?
The MMA provides a relative risk ranking of mortgage markets across jurisdictions based on macroeconomic and mortgage industry considerations. The MMA framework assesses, on a relative basis, economic risk and mortgage industry risk within a jurisdiction. We use this assessment to calibrate the 'AAA' and 'B' foreclosure frequencies for an archetypal pool of loans. The archetypal pool is defined in the guidance document for each jurisdiction. Generally, jurisdictions with a lower MMA will have lower 'AAA' foreclosure frequencies for an archetypical pool than jurisdictions with a higher MMA assessment.
Will a stronger MMA always lead to a lower 'AAA' weighted-average foreclosure frequency for an archetypal pool of loans?
The MMA generates a range of possible 'AAA' default probability anchor points, and some of the ranges overlap between adjacent MMA scores. Various considerations may drive a situation where a stronger MMA does not lead to a lower 'AAA' weighted-average foreclosure frequency for an archetypal pool of loans. However, by way of an example, jurisdictions where there is data of a better quality and quantity, especially through a period of economic stress, may have a lower 'AAA' anchor than a jurisdiction with a stronger MMA, but with relatively inferior data quality.
How often would the MMA of a given jurisdiction change?
The MMA has been calibrated to ensure stability, and we will revise it where we see material and persistent changes to economic and mortgage market risk to ensure that our ratings are forward-looking.
What happens if a loan or borrower characteristic exists within a specific jurisdiction that is not mentioned in either the global RMBS criteria or the jurisdictional guidance?
This situation does not necessarily mean that we cannot rate a transaction exposed to such loans or borrowers. The global RMBS criteria provide the overarching framework, but in the absence of criteria or guidance detailing our approach to a specific factor, we will use our analytical judgement.
Related Criteria
- Global Methodology And Assumptions: Assessing Pools Of Residential Loans, Jan. 25, 2019
- Guidance: Global Methodology And Assumptions: Assessing Pools Of Residential Loans, Jan. 25, 2019
- What Are Rating Criteria, Dec. 15, 2017
- Principles Of Credit Ratings, Feb. 16, 2011
This report does not constitute a rating action.
| Primary Credit Analyst: | Alastair Bigley, London 44 (0) 207 176 3245; Alastair.Bigley@spglobal.com |
| Secondary Contact: | Jose Coballasi, Mexico City (52) 55-5081-4414; jose.coballasi@spglobal.com |
| Methodology Contact: | Andrew M Bowyer, CFA, London (44) 20-7176-3761; andrew.bowyer@spglobal.com |
| Additional Contact: | Structured Finance Europe; StructuredFinanceEurope@spglobal.com |
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