Fitch Ratings downgraded 31% of its 2006 US subprime residential mortgage-backed securities (RMBS) as a result of the US subprime crisis, the agency said today.Default rates on 2006 mortgages are now double the rates on 2005 mortgages, and house prices continue to decline, the agency said. As a result, Fitch has downgraded 1,003 classes of subprime RMBS notes out of 3,231. The downgrades are concentrated among RMBS backed by closed-end second-lien mortgages. Even the highest-quality AAA-rated notes backed by such mortgages have not been immune, with 32 out of 51 downgraded. First-lien loans are more secure, Fitch found. The downgrades were concentrated among lower-quality notes (BBB+ or lower).
Fitch is changing its loss-projection model, giving more weight to early performance, which increases the predicted chance of default, and increasing the expected default rates of adjustable-rate mortgages. It plans another review in approximately six months.
More on Risk Management
New approach introduced six months ago, as event risk increases
‘Under-risked’ plans will not hit 7.5% return targets, warns Paamco CEO
Chief risk officers from boutique and institutional investment firms talk about their risk management and reporting platforms
Acquirers are being punished for actions they had no control over
Sign up for Risk.net email alerts
Nominated for two technology awards
Nominated for post trade technology award
Sponsored webinar: Collateral and counterparty tracking
Isda directors warn on fragmentation, access and liquidity - but expect problems to pass
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.