Fitch: Liquidated U.S. RMBS Loss Severities Rise for First Time Since 2011

Link to Fitch Ratings' Report: Residential Mortgage Market Index -- U.S.A.

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=729787

Loss severities on liquidated U.S. RMBS loans rose last quarter following six straight quarters of declines, according to Fitch Ratings in its latest quarterly index.

Home price increases in 2012 and early 2013 have been positively influencing loss severities by offsetting the costs of extended liquidation timelines. However, home price growth began to slow in fourth-quarter 2013 (4Q'13) while timelines continued to lengthen, according to Director Sean Nelson. 'Judicial foreclosure states were a particular problem spot with respect to longer timelines last quarter, even as timelines in non-judicial states start to level off,' said Nelson. 'Longer liquidation timelines result in higher loss severities due to greater carry costs and higher potential for property deterioration.'

Another notable incidence that took place last quarter involved servicer advancing. Specifically, the rate at which servicers advanced missed borrower payments increased in 4Q'13 for the first time since the onset of the financial crisis. 'All things being equal, greater advancing typically results in higher loss severities, though the recent increase in advance rates suggests that servicers are starting to see greater recoveries as a result of the home price gains,' said Nelson.

Fitch's index is published quarterly and highlights performance trends in legacy and new issue RMBS, house price conditions and mortgage market developments. Fitch's Liquidation Timeline index measures the average number of months between last payment and liquidation among liquidated U.S. private label, securitized mortgage loans.

The Mortgage Market Index -U.S.A. is part of Fitch's of quarterly structured finance index reports. It is available at 'www.fitchratings.com' or by clicking on the above link.

Additional information is available at 'www.fitchratings.com'.

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