... is driven by the macroeconomic environment of the country, as well as housing and mortgage market conditions. Fitch assesses these factors when setting assumptions for its asset and cash flow analysis, reflecting changes in market dynamics over time. Asset Analysis: Fitch's key parameters for assessing mortgage portfolio performance are: (i) the foreclosure frequency (FF) rates -- determined by the original loan-to-value ratio (OLTV) (or sustainable LTV (sLTV) in the UK), the debt-to-income ratio (DTI), and borrower and loan characteristics; and (ii) the loss severity (LS) rates, derived from the current indexed LTV (CLTV), the market value declines (MVDs) of foreclosed properties, foreclosure costs and the timing of recoveries. Operational Risk: There is a direct relationship between the quality of the origination and servicing processes and the performance of an associated mortgage portfolio. For this reason, Fitch reviews the activities...
