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Tag Archives: Fitch Ratings

Analysts Consider How Ability-to-Repay and QM Impact RMBS Losses

As lenders prepare to adopt the Ability-to-Repay and Qualified Mortgage (QM) rules in January, so too are ratings agencies preparing for these new rules. Fitch Ratings released a report revealing its expectations for how the rules will impact future loss severities on residential mortgage-backed securities (RMBS). Overall, Fitch expects the rules to result in greater underwriting uniformity and enhanced due diligence, with 100 percent of reviews completed on all QM and higher-priced QM loans.

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Long Liquidation Times Ramp Up Loss Severities Despite Rising Prices

While home prices have risen 14 percent nationally since their trough a few years ago, Fitch Ratings points out that loss severities on residential mortgage-backed securities have only 5 percent over the past year. The slow rate of improvement is primarily the result of prolonged liquidation timelines which hit an all-time high in the third quarter. Currently, 32 percent of seriously delinquent homeowners have not made a payment in more than four years.

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Report: Housing Bubble Fears May Not Be Unfounded

Though many analysts in recent months have waved off concerns of a new housing bubble in the making, Fitch Ratings says now might actually be a good time to worry. The agency's analysts have identified a bubble risk in continuing price increases and see several factors that could halt, or even reverse, recent market gains, Fitch explained in a report released Wednesday.

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JPM Settlement Means Banks May Need to Increase Litigation Reserves

JPMorgan Chase's $4 billion settlement with the Federal Housing Finance Agency (FHFA) reached late last week ""sets a relatively high bar"" for the 13 other banks still facing litigation from the federal agency, according to Fitch Ratings, which suggested Tuesday that some of the banks may need to increase their litigation reserves before settling. The $4 billion is about 12 percent of the original face value of the private-label mortgage-backed securities for which FHFA sought damages.

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Industry, Congress Urge DeMarco Not to Lower Loan Limits

Federal Housing Finance Agency Acting Director Edward DeMarco is deliberating lowering the loan limits for Fannie Mae and Freddie Mac. Congress and the industry, however, are voicing a singular opposition, claiming such action would be detrimental to the housing recovery that is starting to take place across the country. Federal lawmakers and several industry groups sent letters to DeMarco over the past week, some even questioning the legality of such a move.

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Fitch: Government Shutdown Could Squeeze Title Insurers’ Margins

According to Fitch Ratings, title insurance companies may be among the first in the housing sector to feel the effects of a Congress that the Brookings Institution describes as ""failing the American people."" Title insurers are sensitive to macroeconomic factors such as employment levels, consumer sentiment, and interest rates, and Fitch says the longer the government shutdown lasts, the bigger the potential profitability impact to title insurers.

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Analysts Weigh in on Potential Impact of Proposed QRM Rule

Following the release of the revised Qualified Residential Mortgage (QRM) rule from six federal agencies, several analysts offered insight into how the revisions might benefit or impede progress in the mortgage market. Fitch Ratings believes adopting a QRM standard that mirrors the QM definition will trigger more activity for the jumbo origination and securitization market. Capital Economics, though, noted the QM and QRM proposals aren't much help when it comes to the long-term goal of reducing the presence of the GSEs in the mortgage market.

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Fitch Anticipates Continued Growth for Housing into 2014

In the backdrop of a slow growing economy, Fitch Ratings projects the housing recovery will expand this year and the next-just not at an explosive pace, according to a report. The forecast for 2013 is for existing-home sales to increase 7.5 percent and for new home sales to rise by 22 percent. Meanwhile, single-family starts should grow 18 percent, and multifamily starts should jump 25 percent.

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Several Markets Experiencing Strong Price Growth, High Unemployment

For several markets across the country, strong home price growth is also attached to a double-digit unemployment rate, leading Fitch Ratings to view the strong price appreciation as unsustainable. In a recent report, Fitch highlighted seven metro areas where high unemployment rates were in the backdrop of annual double-digit home price gains. The top two were Detroit and Las Vegas, while the remaining five were in California: Sacramento, Stockton, Los Angeles, Bakersfield, and Riverside.

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Fitch: Sale of REO Assets Lowers CMBS Delinquency Rate in June

In June, an increase in the sale of REO properties drove down the CMBS delinquency rate, bringing it to a three-year low, Fitch Ratings reported. At 7.18 percent, the CMBS delinquency rate fell 19 basis points (bps) from the month before in May and is at its lowest level since March 2010. ""The CMBS delinquency rate is likely to improve further in the coming months as other large REO properties are sold, including a slew from ORIX's portfolio,"" said Scott Pritchard, director at Fitch.

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