Kroll Warns of ‘Extraordinary Expense’ Risk in RMBS

Kroll Bond Rating Agency on Wednesday warned that so-called extraordinary expenses in residential-mortgage-backed securities can be a possible credit risk.

The expenses due to payments to the master servicer, securities administrator, trustee or custodian as indemnification or reimbursement for claims, losses, liabilities, costs or expenses in a securitization can lead to potential credit risk and potential rating volatility depending on their treatment within the structure, Kroll noted in its report.

These extraordinary expenses are paid or reimbursed from the trust fund and are senior in priority to payments of principal and interest, the ratings agency said. Therefore, they can lead to potential credit risk and potential rating volatility depending on their treatment within the structure.

Article source: http://www.nationalmortgagenews.com/dailybriefing/Kroll-Warns-Extraordinary-Expense-Risk-RMBS-1039176-1.html

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