In response to recently raised questions regarding the assignment of shadow' ratings to the underlying collateral in ABS/MBS CDOs, particularly in the CMBS market (see ASR 6/18 and 6/25), Fitch released a new report last week demonstrating that there is no meaningful analytic justification for the refusal to recognize or notch' Fitch-rated CMBS collateral in ABS/MBS CDOs.

The report asserts that these exclusionary notching policies do not appear consistent with the market's acceptance of a Fitch rating on CMBS collateral. It also refutes claims from Moody's that appeared in ASR (6/25) which said that Fitch's credit enhancement levels are consistently lower than those of other rating agencies.

On the contrary, Fitch says, all three rating agencies are active in CMBS, yet significant differences do not appear among in-place ratings. Despite independent rating approaches, credit enhancement levels are similar deal to deal, as are structures, policies and terms, Fitch says.

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