In its latest "GSE CRT Loss Projection" report, Fitch Ratings revealed that their reference pool loss projections have lowered on every transaction compared to their prior review in July 2018. At the “BBBsf’ rating stress level, projected losses were revised downward by an average of 15 basis points (bps) as a percentage of the remaining mortgage loan pool balance.
The declining projected losses reflect strong collateral performance, increased home price appreciation, and a shorter remaining period until transaction maturity,” the report stated.
The GSE CRT Loss Projection report is published every six months in January and June detailing the projections for future credit events and losses on mortgage loan pools referenced by GSE credit risk transfer transactions.
The report points out to an increase in overall as well as early delinquency trends among recent transactions—a higher trajectory compared to prior vintages. It indicated the trend remains better than initial expectations even for recently issued transactions.
According to the report, the average 60-plus day delinquency percentage for 60 percent to 80 percent loan-to-value (LTV) reference pools is 25bps among transactions with at least 12 months seasoning. No pool was higher than 56bps in this category, it said. For 81 percent to 97 percent LTV reference pools, the average is 44bps, with no pool higher than 90bps.
Fitch also highlights a 2 percent average increase in prices since the last review in July. “The resulting lower mark-to-market LTV ratios of the reference pools have driven current loss expectations lower relative to deal closing,” the report adds.
According to the report, voluntary mortgage insurance (MI) cancellations were higher than expected. “For borrowers who are eligible to cancel but have not yet done so,” the report reads, “Fitch increased the haircut to the MI benefit to reflect the possibility that they could cancel sooner than the model currently expects.”
The report also indicated that all GSE CRT transactions reviewed have a hard bullet maturity date of 10 years or 12.5 years from issuance, depending on the transaction.
Read the full report here.