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Moody’s predicts continued losses for sub-prime RMBS

A report from Moody’s Investors Services has predicted that losses on securitised sub-prime loans in the UK are set to continue into 2011.

In its report entitled Is International Securitisation on the Road to Recovery? Moody’s says that the performance of many asset classes across Europe, the Middle East and Africa will continue to deteriorate for the rest of this year and into 2011.

One of the asset classes analysed by Moody’s was securities backed by UK sub-prime mortgages.

The report says: “Moody’s expects that deterioration in the performance of UK non-conforming RMBS will continue into 2011.

“Losses have accelerated over the past six months.

“The rating agency believes that home prices and the unemployment rate will be key performance factors for this sector.”

Overall the report focuses on a wide range of asset classes and regions and also covers the performance of UK securities backed by credit card loans, securities backed by car loans in the EMEA regions, Spanish and Asia Pacific securities and global derivatives.

Looking at all of these assets Moody’s says that despite predictions of GDP growth in the short-term the rate of employment and house prices across the EMEA regions is set to deteriorate well into 2010.

The ratings agency says this will lead to securitised loan losses remaining at elevated levels throughout 2011 and 2012.

Frederic Drevon, head of EMEA securitisation at Moody’s, says:”While there appears to be a glimmer of light at the end of the tunnel, it is still too early to interpret improvement or slowed deterioration in a particular sector as a sign of recovery.”

“When the securitisation markets do recover, it is uncertain what the level of receptivity will be and therefore what issuance volumes may be.”


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