Sub-prime repossessions at lowest since 2005
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Repossessions in UK sub-prime residential mortgage-backed securities declined to 1.48% of the outstanding balance in February 2010, a level last recorded in August 2005, according to Moody’s Investors Service.
The weighted-average delinquency trend also fell to 19.2% in February 2010, from its peak of 21.0% in June 2009.
Most series recorded falling levels of delinquencies, but the delinquencies in transactions issued by Preferred and Money Partners have increased.
The total redemption rate continued to fall – recording 9.4% in February 2010 – less than half the level recorded in February 2009, and a third of the level recorded in February 2008.
The weighted-average cumulative loss trend reached 1.5% of the original balance in February 2010. This compares with 0.6% in February 2009 and 1.0% at H1 2009.
In 23 transactions, the performance has improved and excess spread has been captured to refill the reserve fund amounts which had been drawn in previous quarters.
However, in only three transactions further amounts have been drawn from the reserve fund to cover losses.
The reserve fund was not at target in 36 UK sub-prime RMBS transactions, and in 10 transactions the reserve fund has been fully depleted.
Georgij Ludmirskij, a Moody’s senior associate, says: “In transactions where no reserve fund was available to cover losses, principal deficiency ledgers have been recorded. In three transactions, namely Eurohome 2007-2, Eurosail 2007-1 and Uropa 2007-1, the junior classes of notes have not paid any interest.
“With the exception of Class E1c in the Eurosail 2007-1 transaction, which was downgraded to C from Ba3 in September 2009, none of these classes of notes has a Moody’s rating.”
Moody’s outlook for the UK sub-prime RMBS market is negative. A total of 127 UK sub-prime RMBS transactions have been launched and rated by Moody’s since 2001.
As of February 2010, a total balance of £25.5bn was outstanding in this market, compared to £29.5bn as at February 2009.
Since January 2009, no new transactions have been issued in the UK sub-prime market.
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Readers' comments (7)
Anonymous | 15 Apr 2010 2:21 pm
probably because they are now all on libor linked variables rates - benefiting from a very low rate. as soon as libor increases likely so will repo rates
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Anonymous | 15 Apr 2010 2:50 pm
More like the value of the underlying assets have depreciated leaving the lenders/investors with an unpalletable shortfall should the asset be realised through repossession sale. Borrowers are now having there arrears capitalised and are allowed more time to make arrangements. Its TCF in a way...
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Anonymous | 15 Apr 2010 3:04 pm
Whatever the reasons behind this news it is a positive statement after the standard prediction of doom and gloom 12 months ago. Whatever the circumstances, whether sub prime or prime, the vast majority of people will fight tooth and nail to retain their homes. Is it possible that the so called timebomb of sub prime will not be the explosion the doom merchants predicted? I for one hope this is correct
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Anonymous | 15 Apr 2010 3:42 pm
Dont really see it as a positive statement, as alreaady said, the assets have depreciated further forcing lenders to balance recovery of arrears with the prospect of significant volumes of properties in possession they cant sell if they dont.
All the issues with sub prime are still there, it's just been shifted to a different angle.
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Anonymous | 15 Apr 2010 3:47 pm
Low interest rates and likely losses must be factors. As must be the pressure on lenders by FSA not to take possession unless all avenues have been explored, which is different to the old view of litigate at 90 days regardless. But agreed, whatever the reasons this is good news for the whole financial market.
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Anonymous | 16 Apr 2010 8:31 am
It is good for those that have been able to make arrangements with the lenders due to the low interest environment and the amount of grace afforded now afforded to borrowers. I have been witness to a growing number of people who can no longer afford their mortgages, are incurring collections and interest charges, increasing mortgage balances and are in no danger of repossession because financial provisions dictate that the loss to the lender is to much to stomach. This is a potential time bomb as these issues will have to be addressed at some stage.
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Peter Galloway | 16 Apr 2010 10:47 am
This is a very misleading headline. There has been no recent sub-prime lending. Of course repossessions are down. Strewth!
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