...This report describes Fitch Ratings' criteria for rating non-performing loans (NPL) transactions backed by real estate collateral. It also details the qualitative and quantitative factors considered in Fitch's analysis. The criteria are global, as the key rating drivers pertain to each asset class and jurisdiction. Sector-specific addenda which highlight aspects of the analysis specific to a region or asset class may be added as market activity warrants. Fitch's analysis of NPL transactions is predicated on the level and timing of recoveries from the disposition of residential and commercial real estate-secured loans that are in, or likely to, default. Recoveries, stressed incrementally higher for each rating scenario, are the basis for the agency's cash flow assumptions. Rating determinations are based on the ability of these cash flows to cover debt service on the issuer's proposed liabilities, in the context of the structural features of the transaction. Servicing risk is also an important...
