Dominion Bond Rating Service is concerned about the possible risks that investors in mortgage-backed securities could face from the possible inclusion of so-called “predatory loans.”

DBRS says that it believes the inclusion of predatory loans in a transaction raises the risk profile of a transaction, which in turn affects its criteria for rating U.S. mortgage transactions. In some jurisdictions, laws against predatory lending possibly create unlimited liability, which can pass through to investors in these products.

In response, DBRS is publishing a paper that attempts to explain predatory mortgage loans and the issues that result from their possible inclusion in mortgage-backed securities.

It says that, absent a single federal standard, DBRS will provide commentary to the market on both servicing and origination issues related to liability in U.S. mortgage transactions by updating the DBRS mortgage rating criteria by jurisdiction. As part of that process, DBRS is releasing the paper that includes a chart with detailed information related to the various jurisdictions’ laws regarding assignee liability.