Delinquency Rates on Post-Crisis U.S. RMBS ‘Nearly Zero’

 
Delinquency Rates on Post-Crisis U.S. RMBS ‘Nearly Zero’

Delinquency rates on recently issued U.S. residential mortgage-backed securities (RMBS) remain nearly zero after the first post-crisis transaction was completed, according to a new report issued by Fitch Ratings.

The report from Fitch, U.S. Prime Jumbo RMBS Monthly Trends Report, found that of the roughly 20,000 loans securitized since 2010, only two were currently over 60 days delinquent.

"When loans that are only one payment behind are included, the total delinquency as a percentage of the remaining loans is only 18 basis points," the report said.

Credit performance had a lot to do with the extremely low delinquency rate.

"The exceptionally strong credit performance for post-crisis RMBS reflects the unusually high credit quality and tight loan underwriting of the mortgage pools," said Grant Bailey, Managing Director at Fitch.

According to the report, "Even compared with strong-performing vintages, such as those prior to 2005, recent vintages have higher FICO scores (771 versus 732), lower combined loan-to-value ratios (68% versus 70%) and more full documentation loans (100% versus 64%)."

The report also commented that volatile prepayment behavior has also been a distinguishing characteristic of recent transactions. After spiking to an annualized prepayment rate of above 60 percent in 2012, Fitch found that most transactions have slowed considerably, currently prepaying at rates below 10 percent.

Fitch Ratings commented that 47 new issue prime transactions have been issued since 2010, with most of that volume in 2013. However, 2014 is off to a slow start, with only four transactions completed in the first quarter.

"A dominant government-sponsored enterprise presence, rising mortgage rates and challenging securitization incentives continue to constrain issuance of prime jumbo RMBS," Fitch said.