Structured Finance

Structured Finance Exposure Draft

This teleconference followed the publication of Fitch’s Exposure Draft for Structured Finance and Covered Bonds Counterparty Rating Criteria. The Exposure Draft changes concentrate around the analysis of commingling risk, remedial periods for account banks, and the case-by-case analysis for payment interruption risk as well as the qualified investments definition.

Fitch Global ABS Survey Indicates Sharply Rising Optimism

In Fitch's fourth annual survey conducted at Global ABS, 77% of respondents expected 2018 issuance volumes to beat last year's EUR107bn, up from 44% in 2017 that expected a year on year rise. Of this 77%, 51% thought they would rise between 10% and 25%, while 26% thought volumes would rise by 25% or more.

Italian House Prices Remain at Trough

Italian home prices have been stable at their trough, 17.1% down from the 2008 peak, for eight quarters in a row, even though the number of property trades has been increasing (8% yoy in 2017).

Structured Finance Faces LIBOR Coordination Risk

Stronger provisions in transaction documentation ahead of LIBOR's discontinuation are an important step to limit the number of legacy structured finance contracts. However, much still needs to be done before the end of 2021 when forced LIBOR panel participation will end.

Stable Australian Mortgage Performance Despite Seasonal Arrears Increase

Australia's 30+ day mortgage arrears increased by 12bp to 1.13% in 1Q18 from the previous quarter, which is consistent with the seasonal increase in spending during the end-of-year holiday period.

Southern Europe NPL Reduction SF Implications to Be Seen

Over the past six years, many countries have implemented significant reforms aimed at resolving NPLs, including the removal of structural impediments to portfolio sales, updating insolvency and judicial frameworks aimed at speeding court rulings and increasing out-of-court resolutions.

Senior US CLO Notes Resilient Under LevLoan Stresses

Loosening loan documentation, rising senior leverage and other late-cycle changes in leveraged loan credit dynamics suggest recoveries could come under greater stress in the next downturn, but we expect senior CLO ratings to withstand this pressure under three stress scenarios of differing severity.

Milken Institute 2018 Global Conference

Milken Institute 2018 Global Conference - De-Risking Emerging Markets Investments

Jeremy Carter, Chief Credit Officer, joins panelists at the 2018 Milken Institute Global Conference to discuss the de-risking of emerging markets.

Australia's 'AAAsf' RMBS Ratings Resilient under Stress Test

Our stress test of Australian residential mortgage-backed securities (RMBS) shows the resilience of 'AAA' ratings, even during an Irish-like stress.

APAC Covered Bonds' Long Wait for EU Directive Decision; Uncertainty Lingers

Fitch Ratings believes the long lead time for a decision - and lack of clarity around - treatment of "third countries" under the European Commission's (EC) draft covered bond directive and proposed EU capital requirement regulation, may create uncertainty for the recognition of Asia-Pacific (APAC) covered bonds.

Low 4Q17 Australia Auto ABS Net Losses Despite Rising Arrears

Net losses in Australian prime auto ABS in 4Q17 improved despite growing arrears. Arrears above 30 days increased to 1.46%, the highest for a fourth quarter period, while the annualised net loss rate fell by 10bp from 3Q17.

German Court Ruling Underscores Risk to Diesel Car Prices

This week's German court ruling that cities can impose restrictions on diesel vehicles sets the stage for diesel car bans, which will keep pressure on demand and prices. We believe Fitch-rated German auto ABS deals would prove resilient in the face of sharp car price declines, but we will continue to monitor the market to assess whether we need to adjust our asset performance assumptions.

Auto ABS Index: Europe

European auto ABS performance was stable in 4Q17 as delinquencies and losses remained close to the levels observed in 3Q17.

What to Watch for 2018

Outlooks compendium for Global Autos and related outlook

Dutch Property Sales at Record High

Dutch home prices increased 7.6% in 2017. Apartments have increased significantly in price, rising faster than any other property type. Apartments have outperformed the market for each quarter since 2Q15.

2018 Credit Outlook Conference

Why is UK Consumer Debt So High?

Brian Coulton, Chief Economist, Fitch Ratings explores the reasons why the UK housing sector is “running on fumes” and how the US has successfully reduced the household debt-to-income ratio.

Global House Prices Will Rise, but Ideal Conditions to End

National house prices are forecast to rise this year in 19 of 22 markets, but growth is expected to slow in most markets and risks are growing as the prospect of gradually rising mortgage rates comes into view this year. Related: Eurozone Housing, Mortgage Recovery to Continue in 2018 I APAC's Housing Market Slowdown to Continue in 2018 I US Residential Prices Steady, Canada Slowing in 2018

Asia-Pacific Structured Finance Stable in 4Q17; Upgrades in Australia and China

Some publicly rated structured finance (SF) and structured credit (SC) transactions in Asia-Pacific were upgraded in 4Q17, as in the previous quarter, says Fitch Ratings. Assets backing Asia-Pacific SF transactions continue to be supported by low official interest rates and unemployment.

EU SF Capital Charges Less Severe, but Mask Risks

Final European securitisation rules will see a smaller-than-expected increase in capital charges for bank investors, but will not fully distinguish between all risks. The new rules aim to boost securitisation as part of the Capital Markets Union plan.

Risks to Watch: Global Housing

As part of our Risks to Watch series, Suzanne Albers, Senior Director in Structured Finance, discusses the outlook for global housing over the next 12 months.

New Spain Mortgage Law May Boost Out-of-Court Resolutions

Proposed changes to Spain's mortgage law would support the trend towards out-of-court management of distressed loans, which tends to deliver faster resolutions. If lenders do opt for judicial procedures, recovery times could be extended, but they are already long in Spain.

2018 outlook

US Structured Finance Stable for 2018, Pockets of Risk Persist

A generally supportive macro environment and low interest rates remain the chief tailwinds for securitized assets. The gradual rise in interest rates in the coming year is manageable and not expected to adversely impact performance. More Global 2018 Credit Outlooks

2018 outlook

Stable Outlook for European Securitisation Despite UK Challenges

Only 3% of SF ratings are on Negative Outlook or Rating Watch Negative and 4% are on Positive Outlook or Rating Watch Positive. About a third of SF ratings remain on Rating Watch Evolving following publication of the revised RMBS criteria for Belgium, France, Greece, Ireland, Italy, the Netherlands, Portugal and Spain. More Global 2018 Credit Outlooks

2018 Outlook

2018 Outlook for Asia-Pacific Structured Finance Remains Stable

We have a stable outlook on all structured finance ratings (except for two) in Asia-Pacific. Economies across the region remain robust: we expect GDP growth to stay strong and unemployment rates to remain low throughout the region in 2018. The ratings outlook and the sector outlook are unchanged from last year.

2018 Outlook

Fitch Outlooks on Korean and New Zealand ABS Remain Stable

The outlook on all outstanding New Zealand ABS transactions, as well as Korean credit card and auto loan ABS transactions rated by Fitch Ratings is stable. Also see: Fitch’s Japan Structured Finance Outlook remains stable and the other Global 2018 Credit Outlooks.