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Sub prime securities continue to deteriorate

Non-conforming residential mortgage backed securities are continuing to deteriorate as the economy slows.

According to a Moody’s report, the weighted-average delinquency trend for the UK Non-Conforming RMBS sector continued to rise during Q3 2008 increasing to 11.2 per cent of the current outstanding balance, up from 10.0 per cent in Q2 2008.

The weighted-average repossessions trend jumped to 2.7 per cent, and the
cumulative loss trend over original pool balance reached 0.48 per cent in Q3

Moody’s economist and co-author of the report entitled ‘UK
Non-Conforming RMBS Q3 2008 Indices’ Nitesh Shah says: “Transaction activity in the housing market is low and consumer confidence is depressed — pointing towards continued falls in house prices.”

“Falling property prices put additional pressure on the mortgage servicers, and create an incentive for them to repossess and sell the properties early. There is a risk of a second round impact on the house prices, if ceteris paribus the supply of property on the market increases when the repossessed properties are offered for sale.

Moody’s also found that, despite current low re-mortgage activity and tighter credit conditions there has not been any significant drop in total redemption rates so far. With a TRR of 29.8 per cent, the 2006 vintage is performing in line with historical experience.

“However, it is unlikely that the 2007 vintage will show repayment rates comparable to those recorded for older vintages,” says Moody’s senior associate Georgij Ludmirskij.


Insurance should stay as focus for CII

The decision to change the CII name to the Institute of Financial Services is a despicable act to relegate the insurance industry to an afterthought.


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