RPT-Fitch: New Spanish Mortgage Arrears Slowing

Tue Jan 28, 2014 5:08am EST

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Jan 28 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings says that the volume of loans entering arrears in Spain is slowing as the economy stabilises, although the volume of loans in late stage arrears continues to increase. In 4Q13 the level of loans in arrears between one and two months stood at 1.4% compared with 1.7% in 4Q12.

a€œFewer borrowers got into new mortgage arrears towards the end of 2013 than was the case earlier in the year,a€� says Sanja Paic, Director in Fitcha€™s RMBS team. a€œMore economic stability has been beneficial, but stresses on the residential mortgage sector remain severe.a€�

Data collected by Fitch suggests that servicers are more actively pursuing the sale of properties taken into possession, which is resulting in higher discounts on original valuations. For properties sold in 2013, the average discount was 71.5% compared with 48.3% for all properties sold since 2009. These heavy discounts, along with a steady increase of defaults seen in recent quarters, drove the volume of defaulted loans higher to 3.6% in 4Q13 from 3.3% three months ago.

The oversupply of properties on the market has driven home price declines thus far. In addition, banks are looking to offload the significant number of properties on their balance sheets and are therefore accepting heavy discounts,a€� said Ms Paic.

Fitch's 'Mortgage Market Index - Spain' is part of the agency's quarterly series of index reports. It includes information on the performance of residential mortgages, predominantly from RMBS transactions, but also those held on bank balance sheets. The report sets the housing market against the macroeconomic background and provides commentary on the emerging trends. The report is available at www.fitchratings.com or by clicking on the link below.

Link to Fitch Ratings' Report: Mortgage Market Index - Spain: 4Q13

here

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