Salt n' pepper with that?

No, not a US rap act. But I do think that Fitch is not really pushing it in their new ratings model. According to Housing Wire:

Fitch Ratings said Thursday that it had enhanced its U.S. residential mortgage loss model, called ResiLogic, a key component of the agency’s overall approach to assessing U.S. RMBS new-issue ratings...Fitch said in its report that it is expecting home prices to decline by an average of 25 percent in real terms at the national level over the next five years, starting from the second quarter of 2008.

And that’s the base case scenario.

What is interesting about this, as Housing Wire points out, is that it will put the focus back on seasoned deals. In that kind of environment you cannot just blow out 3 month old loans into an RMBS deal - investors will want some history as well as a lot of credit enhancement. It should also be a powerful stimulus for the covered bond market - something which although strong in Europe, is still nascient in the US. (See here for the FDIC's recent press release on their policy concerning covered bonds. Or, to summarise, Shoop, Baby, Sexy.)