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Global Credit Research - 11 Nov 2010
South African RMBS Indices - September 2010
Johannesburg, November 11, 2010 -- The performance of the South African residential mortgage-backed
securities (RMBS) market continued to deteriorate in Q3 2010, according
to the latest indices published by Moody's Investors Service. In
September, 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 transactions
in the Blue Granite series and GreenHouse Funding (Pty) Ltd -- Series
1 recorded the highest 90+ day delinquencies, reaching 5.47%
and 4.42%, respectively. The weighted-average
cumulative loss trend rose gradually to 0.39% of original
balance in September, 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.
Half of the eight RMBS transactions currently rated by Moody's are
amortising due to the ongoing breach of the respective performance triggers
in the relevant deals. Where the arrears reserve triggers have
been breached, excess spread continues to be trapped and in most
cases excess spread has been sufficient to top up the arrears reserve
to the required target levels. The exception is Blue Granite Investments
No. 4 (Proprietary) Limited, where the arrears reserve has
been below its required target amount since September 2009. Furthermore,
as of the last interest payment date, Blue Granite Investments No.
1 (Proprietary) Limited and Blue Granite Investments No. 3 (Proprietary)
Limited had principal deficiency amounts of ZAR4.91 million and
ZAR0.25 million, respectively.
The only transactions currently purchasing non-performing loans
are the remaining Thekwini transactions (The Thekwini Fund 6 (Proprietary)
Limited and The Thekwini Fund 7 (Proprietary) Limited) and more recently
Private Residential Mortgages (Proprietary) Limited -- Series 2.
This explains the containment of 90+ day delinquencies and the increase
in losses in the Thekwini transactions. To date, there has
been sufficient excess spread to cover the losses in all these transactions.
While 90+ day delinquencies remain high, there are signs of
stabilisation in the 30-to-60 day and 60-to-90
day delinquencies buckets. The stabilisation of these arrears buckets
should alleviate the upward pressure on 90+ day delinquencies in
the short to medium term.
Moody's did not take any rating actions in last six months on South
African RMBS notes. This is largely because the transactions'
overall weaker performance has been offset by the increasing arrears reserves
and note amortisation, leading to greater credit enhancement for
South Africa's economy had been acutely impacted by a fall in world
trade in 2009, when GDP contracted by 1.8%.
We expect South African GDP to grow by a modest 3.2% in
2010 followed by 3.6% in 2011, driven by an improvement
in world trade. Interest rates are at an all time low and we believe
that they may fall in the short term but will remain stable in 2011 .
The unemployment rate increased to 25.3% in Q3 2010 from
24.4% in Q3 2009 and we do not expect it to fall significantly
from these levels. Although borrower debt to disposable income
has been decreasing, it remains high at 78.6%.
According to the ABSA house index, South African house prices have
moved back into positive territory from a 5% year-on-year
decline in 2009. The National Credit Act continues to impact the
foreclosure process with mortgage loans taking longer to foreclose.
Moody's outlooks for South African RMBS is negative (see the report
"EMEA ABS, CMBS & RMBS Asset Performance Outlooks, July
As of 30 September 2010 (Q3 2010), the total outstanding portfolio
balance of Moody's rated South African RMBS transactions was ZAR20.3
billion, compared with ZAR27.5 billion one year previously,
which constitutes a year-on-year decrease of 26%.
On 23 August 2010, Moody's withdrew the credit ratings of the notes
issued by Home Obligors Mortgage Enhanced Securities (Pty) Ltd --
Series 1 for business reasons. The total number of outstanding
transactions reduced to eight from nine, as of 30 September 2010.
Moody's has observed an increase in issuance activity in the primary
market in Q4 2010. On 1 November, Moody's assigned provisional
ratings to the class A5 and A6 notes issued by Blue Granite Investments
No. 1 (Pty) Ltd. On 8 November, Moody's assigned provisional
ratings to a new South African RMBS transaction issued by The Thekwini
Fund 8 (Pty) Ltd. For more information, please refer to the
press releases published on Moodys.com
Moody's indices are published semi-annually and can be found on
www.moodys.com in the Structured Finance sub-directory
under the Research & Ratings tab, under the Structured Indices
sub-category of Industry/Sector Research.
In addition, Moody's publishes a weekly summary of structured finance
credit, ratings and methodologies, available to all registered
users of our website, at www.moodys.com/SFQuickCheck.
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service South Africa (Pty) Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
VP - Senior Credit Officer
Structured Finance Group
Moody's Italia S.r.l
Moody's Investors Service South Africa (Pty) Ltd.
Moody's: South African RMBS performance continued to deteriorate In Q3 2010
2 Maude Street
No Related Data.
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