Coronavirus Containment Actions Pose Material Risk to Global SF

The asset performance of almost 90% of structured finance transactions globally have high or moderate vulnerability to disruptions as a result of the coronavirus and containment efforts. Our report categorizes each sector's asset performance vulnerability to the effects of a temporary coronavirus disruption scenario, including travel restrictions, business and school closures, and a moratorium on large gatherings in major metropolitan areas around the globe.

Related Report: Global SF Coronavirus Risk Ranking (Pockets of Asset Performance Vulnerability; Ratings Protected from Temporary Disruptions)

Coronavirus Payment Holidays Could Delay Subordinated SF Interest

Interest payments on structured finance (SF) subordinated notes with weak liquidity provisions may be deferred if there is a high take-up of payment holidays for an extended period due to the coronavirus outbreak, Fitch Ratings says. We expect most governments or lenders to announce some form of payment holiday or forbearance measures for consumer and SME loans.

Australian Mortgage Arrears Stable in 4Q19; Minimal Impact from Bushfires, COVID-19

Australia's 30+ days mortgage arrears were down 1bp to 1.06% in 4Q19 from the previous quarter, and 1bp higher from the year earlier; 30+ days arrears have now been below 1.2% for the past two and a half years.

More on the Coronavirus

Pre-Crisis Structured Finance Vintages Have Higher ESG Risk

The materiality of environmental, social and governance (ESG) factors on the ratings of global structured finance transactions, reflected by ESG relevance scores (ESG.RS) of '4' or '5', is greater for older vintage structured finance credits. Pre-financial crisis vintages, originated before 2009, are most influenced by negative ESG factors.
 

Highlight Report:
Where ESG Matters for Global SF and CVB Ratings - A Case Study 

China Consumer ABS and RMBS Ratings Insulated from Initial Coronavirus Impact

The ratings on Chinese consumer ABS transactions are insulated from the immediate impact of the Wuhan coronavirus outbreak through structural mechanisms embedded in the transactions.

More on coronavirus

New CFPB Proposal Could Weaken US Mortgage Borrower Protections

The proposal by the Consumer Finance Protection Bureau (CFPB) to move away from the debt-to-income ratio (DTI) to a pricing threshold, such as a spread over the average prime offered rate (APOR), for defining a Qualified Mortgage would weaken the Ability-to-Repay (ATR) Rule and borrower protections from aggressive lending practices.

Positive Rating Momentum to Continue for U.S. RMBS in 2020

We expect positive rating momentum to continue for U.S. RMBS, with rating upgrades far outnumbering downgrades in 2020.

Global Housing & Mortgage Outlook

Fitch Ratings forecasts subdued home price growth in 2020-2021 due to stretched affordability, more challenging economic growth prospects and macro-prudential measures restricting mortgage eligibility. This is despite falling or very low mortgage rates, insufficient supply in major cities and stable or improved employment levels in most countries.

Related Webinars:

• Risks to Global Housing Markets – What to Watch in 2020 (Europe) – Listen here
• Risks to Global Housing Markets – What to Watch in 2020 (Asia) – Listen here
• Risks to Global Housing Markets  – What to Watch in 2020 (North & Latin America) – Listen here

Fitch Ratings Wins 2 Structured Finance Awards; Named Best in Financial Institutions & Public Finance

Fitch Ratings has been recognized as the best rating agency for structured finance at FinanceAsia's annual 2019 achievement awards and was also voted Australian structured finance rating agency of the year by KangaNews. FinanceAsia also named Fitch as the best credit ratings agency for financial institutions and public finance.

Sterling Bank's Mortgage Problem Unlikely to Affect U.S. RMBS Ratings

The voluntary suspension by Sterling Bank and Trust FSB (Sterling) of a mortgage loan program due to problems with documentation procedures is unlikely to affect any U.S. RMBS credit ratings. Although an independent review of past loan production is ongoing, the seasoning and strong performance of the Sterling loans in Fitch-rated pools reduces the likelihood that an underwriting issue at loan origination has meaningfully influenced the credit risk.
 

NY Statute of Limitations on Breach Claims in U.S. RMBS Can Be Mitigated

The six-year statute of limitations in New York for rep and warranty breach claims does not materially increase risk for investors in most post-crisis non-agency U.S. RMBS issued to date due to upfront third-party due diligence. However, if issuers migrate to a smaller upfront diligence sample for future U.S. RMBS, Fitch will place greater significance on the breach review performance triggers to mitigate against the six-year limit.
 

FICO Score Variances Complicate Assessing Consumer Default Risk

Assessing downside risk of U.S. consumer credit can be more difficult if different versions of credit scores are used when lending, underwriting standards are relaxed amid a supportive economy, or when lenders are reaching for growth.

Uneven IBOR Progress Leaves Key Uncertainties for Structured Finance

Industry initiatives and adaptations in market practices continue in anticipation of the discontinuation of IBOR indices. But progress is uneven across jurisdictions and asset classes. For structured finance (SF), like other markets, key uncertainties relating to legacy contracts and transition in consumer products remain.

Introducing ESG Relevance Scores for Structured Finance and Covered Bonds

Fitch Ratings says social and governance risks have the most impact on its new environmental, social and governance relevance scores for structured finance and covered bonds (SF and CvB) ratings globally. Initial results show on aggregate 18% of transactions and programs across SF and CvB asset classes contain contributing ESG factors or credit rating drivers.

• What Investors Want to Know: Structured Finance and Covered Bond ESG Relevance Scores
• Global Structured Finance and Covered Bonds ESG Dashboard Compendium
• Introducing ESG Relevance Scores for Structured Finance and Covered Bonds

Virtual Investor Meeting - EMEA RMBS

Co-Heads of European RMBS, Grant England and Alessandro Pighi, discuss the challenges facing the UK mortgage market from a no-deal Brexit, LIBOR phase out and borrowers looking to refinance legacy interest-only loans.

Fitch is the First Ratings Agency to Bring ESG Relevance Scores to Structured Finance and Covered Bonds

Our ESG Relevance Scores show the relevance and materiality of ESG to our rating decisions and are integrated into our ABS, CMBS and RMBS transaction reports and covered bonds program research to transparently and consistently display the impact of ESG elements on our credit ratings.
 

Watch the Video: Introducing ESG Relevance Scores - Update for Structured Finance and Covered Bonds

Hurricane Dorian Start of Seasonal Risk to CMBS, RMBS Properties

Hurricane Dorian is not expected to affect commercial mortgage backed securities (CMBS) and residential mortgage backed securities (RMBS) ratings due to pool diversification, servicer advancing, and insurance coverage, says Fitch Ratings. However, a hurricane season in which there are multiple severe storms may negatively affect loan performance if damage is widespread and severe and recovery is prolonged.

Australian Mortgage Arrears Stable in 2Q19; Prepayment Rate at New 19-Year Low

National house prices continued to fall. However, declines have slowed and losses from the sale of collateral property remain extremely low, with lenders' mortgage insurance payments or excess spread being sufficient to cover principal shortfalls in all transactions during the quarter. 

Chinese Auto ABS, RMBS Remain Strong Amid High Household Debt

The performance of Chinese auto ABS and RMBS transactions remained strong in 2Q19, despite the country's increasing household debt, due largely to the tight underwriting standards imposed by regulators, Fitch Ratings says. We continue to maintain the stable outlook for these two sectors. 

Fitch Ratings Publishes UK RMBS Rating Criteria Exposure Draft

Fitch Ratings is proposing new criteria, including model and assumptions, for the analysis of securitisation transactions backed by residential mortgage loans in the UK. Certain aspects of the new criteria will also be applicable to the analysis of covered bonds and SME balance sheet securitisation backed by residential mortgages in the UK. 

Structured Finance 2000-2018 Issuance Loss Estimates Down

Total losses on US and Canadian structured finance (SF) bonds are concentrated in crisis-era transactions (2005-2007 vintages) and primarily consist of losses on US RMBS, Fitch Ratings says in a new report. Losses on SF tranches issued prior to 2009 contribute 99.9% of total SF losses. Approximately 95% of pre-crisis bond issuance is resolved (repaid or loss realized) or withdrawn. 

California Earthquakes Do Not Affect US RMBS, CMBS Ratings

The recent earthquakes in southeast California are not expected to have any effect on the ratings of US residential mortgage-backed securities (RMBS) and commercial mortgage-backed securities (CMBS), says Fitch Ratings.

2019 Virtual Investor Meetings: U.S. RMBS

A widening array of innovative mortgage loans emerging this late in the economic cycle will merit some caution for U.S. RMBS investors, as Rachel Noonan discusses in our first 2019 Virtual Investor Meeting for Structured Finance.

New U.S. RMBS Products Are Faring Well So Far

A widening array of innovative mortgage loans emerging this late in the broader economic cycle will merit some caution for U.S. RMBS investors in the coming months; however, they are largely off to a solid start, according to Fitch Ratings in its 2019 Virtual Investor Video Series for structured finance.

Post-Crisis Enhancements Paying Dividends for GSEs

Fannie Mae and Freddie Mac have creatively taken advantage of their scale, access to big data and market leverage to improve loan manufacturing quality and ensure seller/servicer compliance with their policies and procedures.

Fitch Cautious Despite Strong Alt-Doc Mortgage Performance

Although alternative document (alt-doc) residential mortgage loan products that were introduced in the US after the financial crisis have performed better than our expectations, we maintain a cautious approach to these loans because of their limited history

Loss Expectations Decline for Seasoned GSE CRT

 Fitch Ratings has published an update to its bi-annual "GSE CRT Loss Projection" report. The report details Fitch's projections for future credit events and losses on mortgage loan pools referenced by GSE credit risk transfer (CRT) transactions. The report also summarizes Fitch's loss and stress methodology and provides guidance on the relationship of projected losses and ratings.

Major European Cities Face Cooling Home Price Growth

Home price growth in Amsterdam, Berlin, Dublin and Madrid is expected to cool this year and next after several years of rapid growth across Europe.
 

Read the Report on European City Housing Outlook 2019 and visit our Global Housing and Mortgage landing page.

Listen Now:
Falling Home Prices in London, Stockholm & Sydney – Cause and Effect

Rate of U.S. Home Price Growth Continuing to Flatten Out

The pace of home price growth in the United States appears to be slowing from a gallop to a trot, according to Fitch Ratings' latest U.S. quarterly sustainable home price report.

Catastrophic Risk in US RMBS

Fitch Ratings invites you to join a 30 minute webinar to discuss catastrophic risk in US RMBS. Fitch is proposing, for the first time, to make explicit adjustments to residential loan loss projections for catastrophic risk, and is requesting market feedback. Listen Now

Fitch Ratings Adds Natural Disaster Risk to U.S. RMBS Analysis

Fitch Ratings is introducing a new adjustment to its U.S. RMBS loan loss expectations to reflect natural disaster and catastrophic risk.

EMEA Structured Finance Losses Remain Very Low

Total losses on EMEA structured finance (SF) are low and are concentrated in certain crisis-era transactions, Fitch Ratings says in a new report. More than three-quarters of all expected losses have now been realised. 
 

Available On-demand: Fitch Discusses EMEA Structured Finance Losses 2000-2018

LIBOR Mortgages Pose Basis, Legal and Practical Risk for UK RMBS

The discontinuation of LIBOR could introduce basis risk for the UK non-conforming and buy-to-let (BTL) RMBS markets if assets and liabilities reset to different reference rates. Senior tranches are well protected, but junior tranches of legacy non-conforming transactions and excess spread notes of more recent BTL securitisations are more exposed.

Now Available On-Demand
A series of comments published by Fitch on the transition away from IBOR.

Listen Now

Rising Inventory Slowing U.S. Home Price Growth

National home price growth remains stable throughout much of the country, though Fitch Ratings' latest U.S. quarterly sustainable home price report shows the rate of growth slowing down.

IBOR Transition Makes Progress, but Key Risks Unaddressed

Substantial progress in recent months will better prepare financial markets for the discontinuation of IBOR indices, but transition risks remain, Fitch Ratings says in a new report. Our ratings address the payment of interest (and principal) in accordance with the underlying terms of an obligation and would not be directly affected by transition from one reference rate to another or any accompanying spread adjustment. 

Slower Spain Repossessions Offset by Market Practice Shifts

We see the change as compatible with Fitch's recovery timing expectation on defaulted mortgages of four years in our RMBS base case scenario. This already incorporates a buffer over the observed historical average recovery time of around three years.

Fitch Ratings Adds Goldman Sachs as U.S. RPL RMBS Aggregator

Re-performing loans (RPLs) continue to be an attractive collateral choice for newly issued RMBS, and Fitch Ratings has added Goldman Sachs Mortgage Company (GSMC), an established industry participant, to its coverage of RPL aggregators.

Nevada Home Prices Frothier; Northwest Cools

Home price growth in the Northwest has slowed a bit while the most overvalued housing market in the country has not let up, according to Fitch Ratings in its latest U.S. sustainable home price quarterly report. 

Risks to Global Housing Markets – What to Watch in 2019 Webinars

Senior analysts from Fitch’s global RMBS and covered bonds team will discuss the risks to global housing markets in 2019. Across three individual webinars, the team will outline their forecasts for housing markets across the globe focussing on countries facing falling prices, high household indebtedness and political uncertainty. 

Europe: Thursday 17th January – 10:00 GMT 

Americas: Thursday 17th January – 15:00 GMT / 10:00 EST

Asia-Pacific:  Tuesday 23rd January – 10:00 HKT

2019 Outlook: Global Housing and Mortgage

Stretched affordability and overheated home prices in several major cities have been key themes of our global housing and mortgage outlooks for the past five years. Now as part of our 2019 Outlooks series, we take a forward look at this sector for the year ahead.

Press Release: Global Home Price Growth under Pressure

2019 Risks to Watch - Global Housing Markets

As part of our Risks to Watch series, Suzanne Albers, Senior Director on the Structured Finance team, discusses key credit concerns across global housing markets over the next 12 months.

NA Housing, Mortgage Market May Face New Challenges in 2019

Relatively solid sector fundamentals and macroeconomic conditions support a stable housing and mortgage outlook for the US and Canada in 2019, according to Fitch Ratings. However, slower home price appreciation, subdued mortgage lending growth and US policy may present challenges. 

Global Home Price Growth under Pressure

Fitch Ratings says that more countries will face challenges to home price growth in 2019 from high household debt levels, political risk, slowing economic growth and stretched borrower affordability. 

Late-Cycle Risk Grows for NA Structured Finance in 2019

The structured finance markets in North America are positioned for another stable year in 2019; however, Fitch Ratings' outlook report points to several noteworthy external factors investors should consider.

Rising Rates, End of LIBOR to Challenge U.S. RMBS Servicers

The future trajectory of interest rates will remain very important next year for U.S. RMBS servicers, according to participants at Fitch Ratings' recent U.S. RMBS servicer roundtable event. 

New US RMBS Structure Increases Senior Class Risk

A new prime U.S. RMBS transaction that allocates greater credit risk to senior bondholders highlights key differences among rating agencies, according to Fitch Ratings. The transaction, Galton Funding Mortgage Trust (GFMT) 2018-2, is not rated by Fitch.

More Unsolicited SF Comments are Likely due to Late-Cycle Behavior

Late-cycle credit behaviour is manifesting in securitisations more frequently of late, which has triggered more unsolicited commentaries from Fitch Ratings on structured finance deals not rated by the agency and in certain sectors, according to the rating agency in a new report.