Fitch Believes in Loan-Level Data

According to an article in the Independent, Fitch is looking at loan-level data to get a better handle on mortgage loans backing structured finance securities in Ireland.

As this blog has repeatedly said, the only way that structured finance securities can be valued on an on-going basis, which is a basic condition if the securities are to be traded in a liquid market, is with the provision of current data on the underlying collateral performance.  The data needs to be current so that trends, like increases in non-performance, can be monitored and analyzed.

FITCH, one of three main global ratings agencies, plans to do a "loan-by-loan'' analysis of mortgage arrears as it grows concerned over the number of borrowers defaulting. 

The agency also wants to study more closely the actual prices paid by home buyers, as opposed to guide prices and asking prices, used in some surveys of the housing market. 

Fitch has placed 18 tranches of eight Irish mortgage pools on negative watch because of its arrears concerns. The agency said it was particularly concerned about those put together for investors in the period before 2011. 

"In many of these transactions, the volume of loans in arrears continues to increase rapidly while there have been very few repossessions and disposals across the market as a whole.
"These trends create uncertainty when estimating the amount and timing of future loan recoveries,'' said the agency, which monitors the performance of the mortgage pools, known as Residential Mortgage Backed Securities (RMBS). 

"Fitch intends to gather performance data on both a loan-by-loan and aggregated static pool basis,'' the agency warned. 

"The agency will seek further data on completed sales in the Irish market. Once this information has been received and analysed, Fitch will publish an updated criteria report and take necessary rating action,'' it added. 

The number of people in mortgage arrears has climbed to nearly 6pc of the entire market, making investors in RMBS bonds nervous. 

Those in arrears now owe €8.6bn, with some €6.2bn of this owed on accounts more than 180 days in arrears. 

In March, the Central Bank said 106 homes had been repossessed during the last quarter of 2010.