Open for business, Kroll Ratings makes private RMBS prediction

Kroll Bond Rating is capping its second day of work since launching an official marketing campaign yesterday. Eric Williamson, a residential mortgage-backed securities analyst at the firm, is already anticipating some activity on the private-label side. “We expect some RMBS transactions over the course of the year, both on newer collateral and vintage collateral,” he said. Surveillance and intelligence entrepreneur Jules Kroll founded Kroll Bond Rating, with an aim of taking market share from other credit rating agencies Moody’s Investors Service, Standard & Poor’s and Fitch Ratings. When asked in May 2010 for more clarity, he responded to Fox Business “We need to pick the spots where the incumbents have had the greatest harm to their credibility and that’s mortgage-backed securities of a commercial and residential nature,” he said. So far, the agency is proving a draw, Williamson said. “We’ve received a number of inquiries and we are getting more as we are getting out there in front of investors, bankers and issuers,” he added. The company has so far received two mandates, but neither is for MBS. The private-label RMBS market is largely inactive at the moment. But Williamson said progress is being made at reopening the market for this structured finance product. A Kroll rated RMBS, for example, will include greater levels of due diligence, more post-issue surveillance and a two-way dialogue with investors. Another development is that Kroll’s rating agency requires issuers to pay for the rating up front, to avoid any potential conflict on the rating outcome. Kroll will also rely less on predictive modeling, in favor of real-time performance. These selling points are necessary, Williamson said, in order to please the buy-side. “Ultimately a rating agency serves market investors,” he said. “It is imperative.” Write to Jacob Gaffney. Follow him on Twitter @JacobGaffney.