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Fitch: Impact of Sandy on RMBS

If Hurricane Sandy has any impact on the performance of residential mortgage-backed securities (RMBS), it will probably be one that is short-term, according to ""Fitch Ratings"":http://www.fitchratings.com/web/en/dynamic/fitch-home.jsp.


The global rating agency says a ""modest and temporary increase in mortgage delinquency could occur"" after assessing the potential impact of the storm that has devastated areas in the Mid-Atlantic and Northeast coast.


While the damage from Sandy ""will likely prove to be significantly less than that caused by Katrina,"" Fitch drew a comparison between the two to predict the potential outcome of Sandy on RMBS.

Early ""estimates"":http://www.eqecat.com/ for damage from Sandy say the costs could reach $20 billion for insured losses and up to $50 billion for economic damage; for Katrina, the losses were about $100 billion.

After Katrina, the percentage of mortgage delinquencies nearly tripled, rising from 17 percent to 45 percent, but within a year, delinquencies quickly subsided to 25 percent, about 1.4 times higher than the level seen prior to Katrina.

Should the areas affected by Sandy also see the delinquency level become 1.4 times higher, the overall impact on RMBS pools would be modest since New York, New Jersey, and Pennsylvania account for about 12 percent of all outstanding RMBS mortgage loans, Fitch explained.

Fitch also says it believes servicers are better able to handle short-term hardships now than they were in 2005 when Katrina struck.

""Consequently, long-term payment problems due to a short-term disruption are less likely with Sandy than with Katrina,"" the agency stated.