No fears on Clavis arrears

The co-owner of Basinghall Finance says market securitisation arrears should not be taken at face value.

Clavis Securities, Basinghall’s securities vehicle, has been highlighted as exceptional in a Fitch Ratings report on sub-prime securities.

The report says Clavis’ portfolio has experienced the most significant quarterly change, with arrears increasing by 59% in Q2 2008.

But Tony Ward, chief executive of Home Funding, which co-owns Basinghall Finance with West LB, says the figures reflect a rise from low level arrears to higher but still below average figures.

Ward says: “All mortgages in the Clavis programme were acquired through the secondary market. Arrears are climbing but from a significantly lower base than its peer group.

“Many products are coming out of rate incentive periods. This causes payment shock and an increase in redemption levels, which makes arrears appear to rise. By way of illustration, one arrears case in 30 appears more significant than one in 50 but is still just one.”

Peter Dossett, assistant director of European performance analytics at Fitch, agrees and says that Clavis’ arrears are far below the average but appear more significant as mortgages are redeemed.