Moody's Investors Service this week will release a report suggesting home equity ABS deals incorporate more effective triggers. Analysts at the rating agency last week stressed they were not aiming to "dictate" the type of triggers used in home equity deals, but did say lower-rated tranches would likely receive a more favorable rating through the use of one of two alternative triggers it outlines in its report, in addition to standard cumulative loss and delinquency triggers.
Moody's solicited comment on a number of the alternative triggers at its annual investor conference last year. The favorite among them has emerged as the so-called pipeline loss trigger, which was found to make deals the "most robust" and exhibit less ratings volatility. A second to the pipeline loss trigger was a hybrid version of the cumulative loss trigger that accounts for prepayment speed.