Fitch Ratings has published its criteria for rating structured finance transactions, outlining five fundamental elements that it uses for each rating. The New York-based rating agency said it published the criteria in the interest of transparency.

The five elements the agency uses to rate structured finance transactions are legal structure, asset quality, credit enhancement, financial structure and originator and servicer quality.

Structured finance transactions include residential and commercial mortgage-backed securities, asset-backed securities, collateralized debt obligations and asset-backed commercial paper products.

“Most of the criteria reports that have been published over the last year or so have not been as robust in describing how we analyze the legal structure and financial structure,” a Fitch spokeswoman said. “Most of those reports tend to focus on asset quality and credit characteristics.” She said that while Fitch, like other rating agencies, has changed and updated its methods for rating structured transactions, these five elements have always been at the core of its processes.

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