Extraordinary expenses in RMBS transactions could either expose senior RMBS bondholders to losses or the structure to ratings volatility, depending on how they are paid, according to a Kroll Bond Rating Agency (KBRA) report.

Extraordinary expenses in RMBS are fluctuating and difficult to anticipate. These expenses can be payments owed to the master servicer, securities administrator, trustee or custodian as indemnification or reimbursement for any claim, loss, liability, cost or expense incurred in connection with a securitization, explained the report.

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