Private-label investors in residential mortgage-backed securities should be at only modest risk for noncompliance with Truth in Lending Act and Real Estate Settlement Procedures Act integrated disclosure requirements, according to Fitch Ratings.
Instances of noncompliance may be elevated at first, as lenders and other players adjust to the new rules, Fitch said. But those issues will likely not translate into higher risk for bondholders.
RMBS investors will be exposed to statutory damages of $4,000 plus legal fees and additional actual damages will be difficult to prove, Fitch said. It's also unlikely investors will be hit with class-action lawsuits, because of a low limit on rewards.
Additionally, borrowers are unlikely to hire attorneys on their own to seek damages.
