Overall losses on bonds issued before the financial crisis are declining thanks to improvement in the U.S. housing market.
The rate of losses on global loan securitizations issued between the turn of the century and 2008 currently stands at 4.9 percent.
Losses on the pre-crisis securitizations, including realized losses and expected future losses, have fallen from 5.0 percent last year.
The findings were discussed in Global Structured Finance Losses: 2000-2014 Issuance announced Tuesday by Fitch Ratings.
Fitch harvested the loss data from $10.5 trillion in structured finance bonds it rates.
According to the New York-based ratings agency, the improvement was driven by a recovery in the U.S. housing market.
“‘Loss performance on 2000-2008 U.S. RMBS deals has continued its positive trend, falling further to 8.1 percent from 8.7 percent last year,” Fitch Senior Director Gioia Dominedo said in the announcement. “This is consistent with our revisions to home price and loan projections, which reflect the continued improvement in the U.S. housing and mortgage markets.”
Dominedo noted that post-crisis transactions are benefiting from
higher-quality collateral and increased credit protection.
“The end result continues to be minuscule losses, with post-crisis vintages ranging from 0 percent to 0.05 percent,” he stated. “By contrast, pre-crisis losses peaked at 11 percent on 2006 vintage transactions.”
