Tag Archives: Fitch Ratings

Mortgage servicer Residential Credit Solutions (RCS) stands out from the crowd in today's world of almost commonplace ratings downgrades and default servicing challenges. RCS has been awarded two upgrades from Fitch of its primary servicer rating for subprime products and its special servicing rating. Fitch said the rating actions reflect the company's 'high touch' servicing approach, competitive performance metrics, and effective default and foreclosure practices.

Fitch Ratings has affirmed the long-term Issuer Default Ratings (IDRs) of Fannie Mae and Freddie Mac at 'AAA', citing the federal government's implicit guarantee that the mortgage giants will remain solvent and its explicit outlays of monetary support as key for the agency's decision. Fitch says the rating outlook for the two GSEs remains ""stable.""

After losses last month, Fitch Solutions reports a recovery among subprime credit-default swaps (CDS) in July. Subprime CDS prices increased 1 percent overall for the month. The largest increases in prices were among 2006 and 2007 vintages, which rose 6.1 percent and 10 percent, respectively. The rate of 90-day plus delinquencies reached a new low for the year - declining 1.4 percent to 10.8 percent. The share of subprime loans with balance modifications has increased by 120 percent over the last year.

Congress' last-minute accord to avert a default wasn't enough to save the United States' top rating from Standard & Poor's. The agency downgraded the long-term credit rating of the U.S. to AA+, a grade just below the AAA rating the U.S. had held for 70 years. Analysts were expecting a temporary spike in Treasury yields, which are closely tied to mortgage rate trajectories, but investors responded with a rush on Treasuries, pushing yields down 13 basis points. Fannie Mae, Freddie Mac, and the Federal Home Loan Banks also had their S&P ratings lowered to AA+ on Monday.

Concerns have begun to mount that underwriting standards for loans in newly issued commercial mortgage-backed securities (CMBS) are on the decline. Addressing this issue, the analysts at Fitch Ratings say they believe there is quite a way to go before standards approach levels seen in 2007, a year viewed by many as the most volatile vintage for CMBS. While Fitch agrees that underwriting standards have declined in recent months, the company stressed that deterioration so far has been off of ""very high standards.""

Fitch Ratings expects that Bank of America's recently proposed settlement for mortgage repurchase and servicing claims will positively affect the ratings of approximately 10 percent of Fitch-rated U.S. residential mortgage-backed securities (RMBS) in the affected Countrywide trusts. In addition, the ratings agency says payouts from the settlement in the short term and improved servicing practices over the longer term are likely to further improve recovery prospects for a larger portion of bonds.

Delinquencies on U.S. commercial real estate loan collateralized debt obligations (CREL CDOs) decreased last month, reversing the previous month's increase, according to the latest index results from Fitch Ratings. From March to April, the delinquency rate rose from 14.1 percent to 14.8 percent. But by the end of May, Fitch says it had fallen back to 14.1 percent. Last month's late-pays dropped as nine new delinquencies were offset by the resolution of 18 formerly delinquent assets.

Prices on credit default swaps (CDS) involving subprime mortgages more than doubled their increase from last month, extending the rally to an unprecedented seventh straight month, according to the latest index results from Fitch Solutions. Subprime CDS prices rose 1.7 percent overall, though price increases were not uniform across vintages, with the 2007 leading the surge. Fitch says most vintages are in the black for the year. The lone negative outlier is the 2006 vintage.

The rate at which distressed loans held in U.S. commercial mortgage-backed securities (CMBS) are being transferred to special servicers continues to decline, according to Fitch Ratings. The agency reports that approximately $85.7 billion in loans were being worked out by special servicers as of the first quarter of 2011. Specially serviced CMBS loans reached a peak in the second quarter of 2010 at $91.2 billion. But Fitch has noticed a declining trend ever since and the agency expects it to continue.

Industry analysts, economists, even lawmakers generally concede that the pooling of risky subprime mortgages into secondary market securities fueled the economic collapse that almost brought the nation's financial system to its knees. But New York Attorney General Eric Schneiderman is looking for proof that major financial institutions were hocking these dicey mortgage-backed securities during the days leading up to the collapse of the housing market, knowing that these transactions would result in billions of dollars in mortgage losses.