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50 e housing industry has endured many changes since the financial crisis, many of them quite painful for the companies that provide home financing, as well as those that support them. Among these, the loss of the private secondary market investor has been the most difficult to overcome. Without investors to fuel future growth, future mortgage demand may not be met, but the memory of their experience during the crisis has kept many investors away. Investors have been satisfied to sit on the sidelines and observe the efforts of the government-sponsored entities and government agencies as they work to remove risk from the system and perfect a lending process that will not lead us to a repeat of the historic downturn. Many of these efforts have been painful for lenders and servicers, as they have led to buyback requests for loans that either should not have been made or that were written in a manner that made it difficult or impossible for investors to recover in the case of default. Between 2011 and 2013, the former GSEs, Fannie Mae and Freddie Mac, issued buyback requests for more than $81 billion worth of loans. e settlements that have come as a result of these requests have slowed the overall growth of the industry and kept other investors from re- entering the market. As you may imagine, the entire industry has been hard at work instituting new policies and even technologies where necessary in an attempt to create loans that truly qualify a borrower's ability to repay. Now it is the industry's duty to prove to investors that a pool of loans ready for securitization is safe from this risk and that the past will not be repeated. It is gratifying, therefore, to see the ratings agencies moving forward to include deeper scrutiny of the collateral file as part of the grading process for pool securitization. Looking back, a great many risks could have been identified had there been unified collateral review standards in place. THE NEED FOR GREATER SCRUTINY While some have criticized the rating agencies for not doing more to protect investors prior to the crash, these firms are in the best position to flag risk in pools of loans that back securities sold to investors. It has been good to see the major rating agencies upgrading their already high standards to better gauge the risk. Most recently, two of the largest of these firms announced changes to the way they would be evaluating the collateral files of the mortgages that back securitized pools. Fitch Ratings and Moody's Investors Services, both in New York, each announced updates recently that will impact their prime RMBS ratings criteria for seasoned loans. e updates are so important, because even with the new safeguards put in place by originators post- crash, the loans that are already in portfolios are still subject to the risks posed by problems hiding in the collateral file. e companies told news outlets that they took the action as a step toward assessing several risk factors "including contractual representations and warranties." In addition, one of the firms, Moody's, includes a risk assessment of deals based on both reps and warrants and a review of the data quality by an independent third party. Fitch said it was basing its assessments on additional criteria related to seasoned, performing loans, including the strength of representations and warrantees, according to published reports. is is a great step in the right direction. In the past, the ratings agencies did not make this kind of assessment when rating mortgage- backed securities, certainly not specifically related to the collateral file. is should allow the agencies to uncover risk hiding in the file, such as missing key documents or assignments M A R K E T P U L S E / M I C H A E L O ' C O N N E L L AN OUNCE OF PREVENTION: THE IMPORTANCE OF THE COLLATERAL FILE TO SECURITIZATION P