RPT-Fitch: U.S. RMBS Performance Mirroring Uneven Home Price Movement

Wed Dec 18, 2013 9:04am EST

Dec 18 (Reuters) - (The following statement was released by the rating agency)

The improvement in RMBS performance has been uneven across the U.S., much like the regional home price differences, according to Fitch Ratings in a special report.

While home prices have increased roughly 17% nationally since fourth quarter-2011, regional price changes vary widely around the average. Home prices have increased 40% in some regions over the same time period, while other areas have seen modest declines in prices. The performance of loans backing RMBS has varied along with regional prices. 'Areas with the largest home price increases have seen the greatest improvement in loan performance, while performance has remained relatively stable in regions with little home price growth,' said Director Sean Nelson.

Borrower equity in the property is a leading driver of performance. Consequently, regions with large home price gains are showing equity improvement in the form of better performance. 'Areas with higher home price gains since 2011 have experienced greater improvement in new delinquency rates, voluntary prepayment rates, and loss severities on liquidated loans,' said Nelson.

Regions that experienced the largest home price declines from the peak of the housing market in 2006 have generally seen the largest improvements in prices since the post-crash trough in 2011. 'Home prices are rapidly increasing back toward their more sustainable long-term averages in areas that had large over-corrections out of the bubble,' said Nelson.

Not all home price gains appear to be sustainable, however. Fitch projects that the pace of recent home price gains in several regions is not fully supported by the underlying economic fundamentals, and thus will begin to slow. As prices begin to level off, so too will the related improvements in loan performance. 'U.S. RMBS Performance Mirrors Home Prices' is available at 'www.fitchratings.com' or by clicking on the below link.

Link to Fitch Ratings' Report: U.S. RMBS Performance Mirrors Home Prices (Performance Trends, Like Home Price Gains, Have been Uneven)

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