Sub-prime RMBS remain stable

The performance of the UK non-conforming residential mortgage-backed securities market remained stable over the three-month period ending February 2012, according to Moody’s.

In February 2012, the 90+ day delinquency index for UK non-conforming RMBS was 16.3%, below the 21.0% peak reached in June 2009.

Since August  2010, outstanding repossessions have remained around 0.9% of the current  outstanding balance, which is substantially below the peak of 3.6% reached in February 2009.

Cumulative losses increased further, although at a slower pace, reaching 2.2% of the original balance in February 2012.

Weighted-average loss severity as a percentage of properties sold was around 26.6%, although different vintages and series demonstrated substantial volatility.

The average loss severity is currently below its  June 2010 peak of approximately 33.4%.

Whilst performance has stabilised in many UK non-conforming RMBS transactions, Moody’s says its remains concerned by  high delinquency levels.

Furthermore, low redemption rates, which were 6.2% in February 2012, are far below the pre-2009 levels of 20%-40%.

In  Moody’s view, these low redemption rates indicate that the portfolios will remain outstanding for a longer-than-anticipated period of time, exacerbating future performance uncertainty.

The total current outstanding pool balance of all 81 transactions rated by Moody’s in the UK non-conforming RMBS market decreased to £21.3bn in February 2012, a year-over-year decrease of 7.1%.