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Fitch: U.S. RMBS Delinquencies Improve in Q4

Serious delinquencies for U.S. RMBS improved across all sectors in the fourth quarter of 2012, according to a new mortgage market index from ""Fitch Ratings"":http://www.fitchratings.com/web/en/dynamic/fitch-home.jsp. Furthermore, the agency expects RMBS delinquencies to continue declining this year.


Fitch reported its 60-plus day delinquency index stood at 28.6 percent at the end of Q4 2012, down from 29.1 in Q2 and a decrease from 30.6 percent in Q4 2011.

According to Fitch, the improvement ""reflects positive selection in the remaining pools, loan modification efforts by servicers, and positive home price trends.""

Liquidation rates for subprime and Alt-A loans saw a modest decline in the fourth quarter due to changes in foreclosure procedures from servicers following requirements from the $25 billion ""national mortgage settlement"":http://dsnews.comarticles/robo-signing-settlement-finalized-2012-02-09, according to the report.

Loss severities on liquidated prime, subprime, and Alt-A loans improved with the increase in home prices acting as a key driver. The increased use of short sales also had a positive impact on loss severities, and Fitch expects the improvement in loss severities to continue into 2013.


""Short sales typically provide better recoveries on distressed loans since the time to resolution is much faster than a full foreclosure and the sale does not suffer from the market stigma of being a bank-owned property,"" Fitch explained.

The growing use of short sales also helped foreclosure completion rates stay near historical lows. The report noted close to 60 percent of distressed loan resolutions in the fourth quarter were actually short sales.

Average liquidation timelines saw the first decline since the start of the financial crises with the help of short sales as well, according to the ratings agency.

However, average timelines for loans in the foreclosure process increased as servicers face the challenge of implementing new procedural requirements from the settlement, Fitch noted.

The overall balance of outstanding loans in RMBS mortgage pools managed to slip below $1 trillion in the fourth quarter for the first time since 2004.

From the start of 2012 to the beginning of the fourth quarter, national home prices have risen by about 5 percent, with California seeing a more than 7 percent increase, according to Fitch.

""Helping the price increase was low mortgage rates and a lower percentage of distressed property liquidations,"" Fitch stated.

While prices seem to be improving, Fitch believes prices may be slightly above sustainable levels and certain regions are at risk of declines.

""The Northeast in particular has not yet seen the significant declines seen in the rest of the country and as such is vulnerable to further home price declines,"" said Grant Bailey, managing director at Fitch.

About Author: Esther Cho


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