The early performance of recently issued U.S. residential mortgage-backed securities (RMBS) transactions has been strong, reflecting the high credit quality of the underlying mortgage pools, according to Fitch Ratings.
Only a single borrower is delinquent of the approximately 1,800 newly originated prime loans securitized in five private-label transactions since the start of 2010. All five of the transactions were issued by Mill Valley, Calif.-based Redwood Trust Inc. Fitch expects the status of the single delinquent borrower to be resolved quickly due to a loan-to-value (LTV) ratio of approximately 50% and verified liquid reserves in excess of the loan amount.
‘Prepayment rates of the loans within the mortgage pools have generally been faster than initially expected due to the historically low mortgage rate environment,’ says Fitch Ratings. ‘To date, approximately 75 percent of the loans issued in 2010 and 30 percentof the loans within the first pool issued in 2011 have already re-paid in full. The relatively fast prepayments have modestly affected the composition of the credit attributes in the remaining mortgage pools.’
Fitch Ratings adds that the credit enhancement percentage for the senior class of the 2010 transaction has increased from 6.5% initially to over 18%. Similarly, for the first pool in 2011, the senior class credit enhancement has grown from 7.5% to 10.5%.