{"id":421365,"date":"2010-03-12T11:17:37","date_gmt":"2010-03-12T16:17:37","guid":{"rendered":"http:\/\/www.businessinsider.com\/fitch-watch-whats-about-to-happen-to-mortgage-investors-when-the-fed-pulls-out-the-supports-2010-3"},"modified":"2010-03-12T11:17:37","modified_gmt":"2010-03-12T16:17:37","slug":"fitch-watch-whats-about-to-happen-to-mortgage-investors-when-the-fed-pulls-out-the-supports","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/421365","title":{"rendered":"Fitch: Watch What’s About To Happen To Mortgage Investors When The Fed Pulls Out The Supports"},"content":{"rendered":"

If you don’t think the housing market is still floating on a Washington-inflated lifeboat, think again.<\/p>\n

Here’s Fitch analyzing what’s about to happen to Residential Mortgage-Backed Securities values once the fed pulls out the scaffolding:<\/p>\n

Fitch  Ratings-NY-12  March  2010:  Loss  severities  on distressed U.S.
  residential  mortgage  loans are likely to rise this year as several key
  government support programs expire, according to Fitch Ratings.<\/p>\n

  Low  mortgage  rates,  homebuyer  tax  credits  and  government directed
  loan-modification programs have led to an improvement in home prices and
  loss  severities  since  second  quarter-2009. But the expiration in the
  coming months of both the homebuyer tax credit and the Federal Reserve’s
  $1.25  trillion  MBS purchase program will increase negative pressure on
  home  prices  and  loss  severities,  according to Senior Director Grant
  Bailey.<\/p>\n

  Additionally,  an increase in the liquidation of loans with unsuccessful
  loan  modifications  is  expected  to  add  to  the supply of distressed
  inventory  in  the  housing  market.  ‘Servicers  are  further  along in
  identifying  borrowers  ineligible  for modifications and will likely be
  more  aggressive in liquidating those loans this year compared to last,’
  said   Bailey.   ‘Less  costly  alternatives  to  foreclosure,  such  as
  short-sales,  should  help  stem rising loss severities due to the lower
  costs and speed of the resolution.’<\/p>\n

  Loss  severities on loans resolved through short-sales are approximately
  10%  lower  than  loss  severities  on loans in which the servicer takes
  possession  of  the  property.  Additionally,  the  seasonal increase in
  housing  activity  through  the  summer may delay the full impact of the
  withdrawal of the government support programs until later this year.<\/p>\n

  Loss  severity  trends  continue  to be strongly dependent on home price
  trends,  as  shown  in  Fitch’s  most  recent ‘RMBS Performance Metrics’
  results. In the two years prior to the recent improvement, national home
  prices  dropped  approximately  30% while loss severities on loans which
  incurred  losses  doubled to record highs of 43% for private-label Prime
  loans, 58% for Alt-A loans and 72% for Subprime loans.<\/p>\n

  Fitch’s  RMBS  Performance  Metrics  combines loan level data from Fitch
  Ratings  and  LoanPerformance  to  show  delinquency  trends,  roll rate
  movement  and  loss rates across vintage, sector, and mortgage type. The
  report  also  includes  data  on  mortgage  servicing  trends,  such  as
  modification activity and advancing percentages, as well as a summary of
  bond rating changes.<\/p>\n

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