Prime and nonprime residential mortgage based securities (RMBS) transactions performance have been improving according to the latest RMBS trends study from Fitch Ratings. Prime performance was strong in the first half of 2018, reflecting the high quality collateral attributes strong macroeconomic conditions and continued home price growth, with 60+ delinquencies averaging only 11 basis points for Fitch-rated prime transactions.
According to Fitch, the expected pool losses on outstanding prime seasoned pools appears to have declined significantly in recent years, compared to the past low delinquency and significant home price appreciation in recent years. Additionally, Fitch notes that nonprime pools have benefited from strong borrower performance and lower than expected delinquencies to date. The study also found that CPRs have caused senior classes to de-lever and pool factors to decline faster than previously expected. Out of roughly 46,000 loans, only 298 loans are delinquent, and only 60 have incurred a loss.
Ratings have seen positive improvements, with RMBS classes initially rated below 'AAAsf' since 2010, the prime sector has seen 51 percent upgraded while 16 percent of nonprime were upgraded. This includes 72 classes in Fitch's biannual review completed in August.
Additionally, combined 2018 issuance activity in the prime and nonprime RMBS sectors is on pace to more than double the previous highest annual total since the financial crisis. Volume in both sectors has already exceeded any full year since the financial crisis, with roughly $13 billion in prime and $5 billion in in non-prime RMBS issued through the first half.
According to Fitch ratings in an earlier Q1 report, non-bank RMBS servicers are shifting their focus from delinquent borrowers and are concentrating their efforts on Fannie Mae, Freddie Mac, and Ginnie Mae loans. “Mortgage servicers are benefiting from a positive credit environment with clean-paying loans becoming the norm and seriously delinquent loans fading from view,” said Roelof Slump, Managing Director, Fitch. More than 90 percent of the company’s rated servicers managed to curtail delinquencies in the first quarter compared with the Q4 2017, it notes.
Find the full report from Fitch here.