From RiskCenter/Garp.com: Derivative Fitch has introduced revised methodology for rating structured finance (SF) CDOs to reflect the increased risk associated with subprime residential mortgage-backed securities (RMBS) as portfolio collateral. The agency reiterates its methodology change announced on July 12 and further identifies additional criteria changes as follows: * Increased assumed default probability for U.S. subprime bonds issued since 2005 by 25 percent (announced July 12); * Modified methodology for treatment of U.S. subprime bonds on Rating Watch Negative to assume a three-subcategory downward rating adjustment for purposes of the rating definition used in Fitch's Default VECTOR model (VECTOR); * Fitch will take into consideration, in conjunction with input from Fitch's RMBS ratings group, additional risk factors, such as those affecting recently issued subprime RMBS, Alt-A performance, closed-end second lien (CES) RMBS, and overlap with other SF CDOs as collateral, that may further increase the 25 percent default probability adjustment or otherwise modify modeling assumptions. This revised rating methodology will apply to all SF CDOs immediately. This includes the issuance of initial ratings on new transactions, as well as maintaining accurate ratings on existing CDOs. Fitch will continue to monitor market conditions, focusing on actual collateral performance versus initial expectations, to see if further adjustments are warranted. Fitch's core CDO modeling tool is the Default VECTOR Model (VECTOR)