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31 Jan 2011
EMEA RMBS Indices -- November 2010
Frankfurt am Main, January 31, 2011 -- The performance of Europe, the Middle East and Africa (EMEA) prime
residential mortgage-backed securities (RMBS) have continued their
stable performance in most countries during the past six month till November
2010, according to the latest indices published by Moody's
Investors Service. Notable exceptions include Greece, South
Africa and Ireland.
The Dutch, UK and Italian prime RMBS markets continued to perform
solidly in November 2010, while the Spanish and Portuguese prime
RMBS markets showed signs of stabilising over the past six months.
Additionally, Moody's noted a slight downturn in performance
in the South African RMBS market, while the performance of the Irish
prime RMBS and Greek RMBS markets continued to turn negative.
Dutch Prime RMBS
The performance of the Dutch RMBS market remained stable in November 2010.
The 60+ day delinquency trend continued to rise moderately,
reaching 0.71% in November 2010. This trend is largely
driven by the 1997 to 2004 and 2007 vintages. As of November 2010,
the 2003 and 2004 vintages were merged into the 1997 to 2002 vintage.
Prepayment rates reached 7.27% in November 2010, having
stabilised in the six-month period prior to this. Overall
losses remained negligible at 0.05% of the total outstanding
balance. Moody's outlook for Dutch RMBS is stable.
UK Prime RMBS
The performance of the UK prime RMBS market continued its stable trend
during November 2010.
In November 2010, the 90+ day delinquency trend rose slightly
to 2% from 1.9% in the previous month. Outstanding
repossessions and cumulative losses stabilised at 0.12%
and 0.17%, respectively.
Moody's outlook for UK Prime RMBS is stable.
Italian Prime RMBS
The Italian RMBS market continued its stable performance during November
2010. Cumulative defaults remained stable in September 2010,
in particular those from older vintages such as 2000 to 2003, 2004,
2005 and 2006. Moody's believes that this reflects the greater
willingness of borrowers to pay off more seasoned mortgage loans (where
the rating agency assumes the mortgage holder has a higher proportion
of equity in their property). Moody's outlook for Italian RMBS
Spanish Prime RMBS
The performance of the Spanish prime RMBS market showed a stabilising
trend in November 2010.
Moody's index of cumulative defaults increased to 1.78%
of the original balance in November 2010, compared with 1.77%
in October 2010. The rating agency's 90+ day delinquency trend
decreased to 0.98% of the current balance down from its
October 2010 level of 1% and well below the 2.40%
peak reached in April 2009.
High levels of write-offs and arrears continue to result in the
drawdown of several reserve funds. The reserve funds of 74 transactions
(81% of the total outstanding) are currently below their target
levels and 14 have fully drawn down on their reserve funds. Ten
deals have breached the interest deferral triggers, affecting 22
tranches. Moody's has also observed that the annualised constant
prepayment rate (CPR) continues to decrease, reaching 4.01%
in November. Moody's outlook for Spanish RMBS is negative.
Portuguese Prime RMBS
The performance of the Portuguese prime RMBS market was stable in October
2010. Moody's 60+ day delinquency trend has remained
at 1.4% since July 2010. In October 2010, outstanding
defaults (360+ days overdue, up to write-off) were around
the same level as in July 2010 at 1.7%, but were still
higher than the 1.4% recorded in October 2009. Furthermore,
most Portuguese RMBS transactions benefit from a provisioning mechanism,
whereby excess spread is captured to provide for future losses on highly
delinquent loans, before the losses are actually realised.
Moody's outlook for Portuguese RMBS is negative.
South Africa RMBS
The performance of the South African RMBS market continued to deteriorate
in Q3 2010. In September 2010, the 90+ day delinquency
trend increased to 3.02% of the current balance, from
2.39% in March 2010, and from 1.77%
in September 2009. The weighted-average cumulative loss
trend rose gradually to 0.39% of original balance in September
2010, an increase of 0.12% over the past 12 months.
Moody's annualised total redemption rate (TRR) remains on a downward trend
and was 21.45% in September 2010, compared with 23.23%
a year ago.
Irish Prime RMBS
The performance of the Irish prime RMBS market continued to deteriorate
during November 2010.
The 90+ day delinquency trend increased to 5.68% from
5.38% in October 2010, while 360+ day delinquent
loans, which are used as a proxy for defaults, accounted for
1.62% of the outstanding portfolios in November, up
from 1.47% in the previous month. Moody's outlook
for UK Prime RMBS is negative. All Irish RMBS outstanding transactions
ratings are currently on review for possible downgrade.
The performance of the Greek RMBS market continued to deteriorate during
In November 2010, RMBS transactions 90+ day delinquency and
cumulative defaults continued their upward trends, having risen
steadily year on year to 1.69% from 0.66%
and to 0.69% from 0.45%, respectively.
All Greeks rated notes are currently on review for possible downgrade.
Moody's outlook for Greek RMBS is negative.
Moody's central macroeconomic scenario is for economic growth in
Europe as a whole to remain sluggish in 2011. However, the
pace of economic recovery will continue to differ among individual countries.
Indeed, economic improvement in Netherlands and UK has been stronger
than in Spain, Italy, Ireland, Portugal and Greece.
RMBS outlooks are stable in the Dutch market, as well as for UK
The rating agency expects stabilization in the Dutch and UK delinquencies
and overall performance to remain within its expectations. Unemployment
levels have already fallen in the Netherlands. Although short-term
increases may be seen over the next 18 months, Moody's expect
some improvement in each country's labour market. For example,
although the unemployment rate in the UK may rise before falling,
the rating agency does not expect the increase to be material.
RMBS outlooks are negative in all other markets. Moody's
expects delinquencies to rise in markets where unemployment is increasing,
particularly Ireland, Greece and Portugal. In Spain,
Italy, Ireland, Portugal and Greece, unemployment rates
continued to increase in 2010. In Ireland, Portugal and Greece,
the rating agency expects unemployment rates to increase for most of the
next 18 months. In Spain, where unemployment rates are highest,
Moody's expects a marginal increase in unemployment rates before
they begin to fall. The negative effect of obligors losing their
unemployment benefits will be seen. In Greece and Ireland,
Moody's expects the majority of delinquencies to be recorded among
borrowers who become unemployed, whereas in Spain, Italy and
Portugal a greater number of delinquencies will result from already unemployed
borrowers losing their existing benefits.
Moody's expects house prices in the UK and Netherlands to remain
largely unchanged for the next two years whereas in Spain they will continue
to fall in 2011.
The total outstanding pool balance of the EMEA RMBS market rated by Moody's
Investors Services stands at EUR1,008.67 million as of November
2010, and has been increasing at a slow pace since the end of 2009.
Markets such as Italy and Spain have experienced slight contractions,
whereas the Russian, Countries of Independent States (CIS) and Dutch
RMBS markets have reported year-on-year rises in their total
outstanding pool balance.
The new report entitled, "Moody's: EMEA Prime
RMBS Stabilising in Most Countries, Except Ireland,"
is now available on www.moodsycom.
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Moody's: EMEA RMBS continue their stable performance in November 2010
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