By Kevin Duignan and Roger Merritt, both managing directors at Fitch Ratings
While the default rate for U.S. ABS transactions remains low, in the last few years there has been a noticeable increase in ABS related performance problems, particularly in transactions involving thinly capitalized seller/servicers and unique asset classes. Recently, ABS trustees have come under fire from some in the market who have suggested that performance issues for certain ABS transactions reflect failures by the trustees. Fitch believes this misses the mark. While the trustee can play an important role in an ABS deal, Fitch believes that unrealistic reliance on trustees increases the risk to investors by potentially masking other more important considerations.