More traditionally underwritten and higher credit quality loans will be the norm when the U.S. residential mortgage-backed securities (RMBS) market for newly-originated loans re-opens, according to Fitch Ratings.

“Lenders are returning to a more traditional style of lending, with loans containing better credit, full documentation, and less leverage,” said Grant Bailey, a senior director at Fitch Ratings.

In its report Prime RMBS Securitization: Back to the Future released this week, the New York-based ratings agency shows that the rating and collateral performance for RMBS backed by new loans is distinctly better than the RMBS of the boom era, which Fitch says were backed by more loosely underwritten loans.

Fitch’s analysis encompassed a sample of prime loans originated between 2005 and 2008 to determine the difference in performance between traditional prime borrowers, with higher credit scores and full documentation, and non-traditional borrowers, or those without these “safety net” parameters.

The results revealed acute differences in the two types of loans. Cumulative loan losses from traditional borrowers tallied 19 basis points, while losses in the non-traditional category shot up to 96 basis points. Delinquencies for traditional RMBS loans came in at 4.5 percent. Non-traditional delinquencies nearly quadrupled to 16 percent.

It has been almost two years since the last private-label RMBS transaction backed by newly originated mortgage loans was issued. While the industry continues to lay the groundwork for restarting the sector, Fitch said it remains uncertain when the next securitization of unseasoned loans will occur, as issuers weigh various regulatory and economic considerations.

However, the agency offers some assurance to investors that when securitization does restart, the mortgage pools will consist of more traditional loans with better credit, more complete documentation, and lower leverage than the majority of loans securitized between 2005 and 2008. Asset performance and investor returns naturally will follow suit.