Sub-prime repossessions at lowest since 2005

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.