View more on these topics

Rating watch could hit Rooftop securitisation

Rooftop Mortgages suffered a blow last week after Fitch Ratings put out a negative rating watch that could result in its second securitisation downgrading.

The ratings agency put out the watch as a way of notifying the industry of its intent to take action which could result in a downgrade.

When Fitch issues this sort of warning it typically takes action within six months. This will either be an affirmation that the problem has gone away or a downgrade.

Three tranches of the lender’s securitisation Farringdon Mortgages No 2 have been put on watch following increased losses in the quarter that culminated in a reserve fund draw.

Back in May Rooftop had its Farringdon Mortgages No 1 securitisation downgraded, which some industry pundits attributed to lax underwriting.

It also sparked fears of a wider impact on the market with investors put off mortgage bonds. But Fitch has now affirmed all tranches of Farringdon Mortgages No 1.

Both transactions are originated by Rooftop Mortgages, a subsidiary of Bear Stearns, and have been the subject of a renewed loan-by-loan and cash flow analysis.

A spokesman for Fitch says: “Nobody has lost any money at this point but the reserve fund is diminished so there is less protection. This is a red flag of a potential problem.”

One source says: “This is bad news for Rooftop as it tarnishes its reputation and could put investors off. If it can’t sell its assets, it’s out of business. But there is a market for downgraded bonds although they sell for a lesser premium.”

But Ginny Darrow, chief executive officer of Rooftop, says: “In October, Farringdon 2’s reserve fund was drawn down for the first time by the relatively low amount of £54,000. This was primarily a result of realised losses during the reporting period.

“We have worked closely with Fitch to understand its concerns and to provide information as requested. We will continue to manage the arrears portfolio.”

Others in the industry argue that this is unlikely to have a wider impact on the securitisation market.

Jeff Knight, director of marketing at GMAC-RFC, says: “The amount of securitisation Rooftop does is marginal compared with other firms so this warning won’t affect bigger players.”

Recommended

House prices are higher in spa towns

Halifax has revealed that home-buyers are prepared to pay a premium to live in a spa town.All 18 spa towns have higher average house prices than their region, while 16 out of 18 spa towns have higher average house prices than the neighbouring towns in their county.Spa towns tend to rank highly for quality of […]

73% Of brokers disapprove of borrowing age limit

Some 73% of Mortgage Strategy Online readers say lenders should not impose a maximum age limit on borrowers. Just 27% think they should. This week, Mortgage Strategy asks: “Is a second charge loan a viable alternative to remortgaging for sub-prime clients?” Q: Should lenders impose a maximum age limit on borrowers?

PPI regulation could push up loan rates

Enforced regulation of the payment protection insurance market could adversely affect the secured and unsecured loans industry as lenders try to recoup the lost revenue involved, Uswitch.com warns.The comparison website’s latest Personal Finance Industry Insight report claims that as a result of what it calls the Financial Services Authority’s ‘clampdown’ on PPI, the annual percentage […]

Thumbnail

Neptune video: Abenomics: the impetus for Japan’s fast-track recovery?

The remarkable performance of the TOPIX over the past year has caused many sceptical equity investors to look again at the Japanese market. These returns have come despite very significant problems facing the Japanese economy. Chris Taylor, manager of the Neptune Japan Opportunities Fund, discusses these problems and whether Abenomics will be able to overcome them, enabling the market to continue to rise.

In the video, Taylor addresses the following:

• The size and speed of Japan’s unprecedented monetary policy
• Abenomics and the implications should it fail
• Corporate Japan and beneficiaries of government policy

Newsletter

News and expert analysis straight to your inbox

Sign up