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2nd Mortgage RMBS Help Drive TPR Growth

Activity in the second mortgage market is helping to drive up the number of third-party review firms seeking to provide due diligence services on residential mortgage-backed securities.

Fitch Ratings’ New York headquarters

There has been a slowdown in private-label securitization activity, according to an announcement from Fitch Ratings.

But despite the overall decline in activity, the number of TPR firms that the New York-based ratings agency has designated as “acceptable” for RMBS work grew by two over the past five months and now stands at 24.

“The TPRs’ primary focus has been on non-QM product along with increased involvement in closed-end second mortgages and home-equity line-of-credit products,” the news release stated.

Fitch said that its review of TPR firms includes a qualitative assessment of their RMBS experience and “evidenced work,” as well as their involvement in industry initiatives.

TPR firms provide Fitch with responses to a detailed questionnaire about operational performance. Metrics reviewed include management and staffing, underwriting process, and quality control. Also analyzed are the valuation and review process, compliance, and IT and reporting.

“Due diligence information provided by TPR firms provides important clarity as to the accuracy of underlying loan data and related information provided by the issuer,” Fitch stated, adding, “TPR firms contribute to the market’s overall perception of operational risk for a transaction, and substantive diligence performed by a Fitch ‘acceptable’ TPR firm can contribute to lower credit risk.”