Fitch Reports Home Prices Cushioning Recent U.S. RMBS from Future Stress

Though slowing of late, strong U.S. home price growth since 2012 is helping recent vintage U.S. prime residential mortgage-backed securities (RMBS) borrowers by providing a cushion against any unexpected economic stress, according to Fitch Ratings in its latest monthly prime jumbo trends report. 'Home price increases are slowing and some regions may still be vulnerable to a correction, but most recent vintage RMBS borrowers will still be left with more equity than they had at origination even if home prices fall 10 percent," said Fitch Ratings Managing Director Grant Bailey. Weighted average combined loan-to-values have improved for deals originated between 2011-2013, as shown below: ►2011: to 50% from 64%; ►2012: to 55% from 68%; ►2013: to 59% from 68%. This comes as home price growth continues to slow. When weighted by the geographic concentration in prime RMBS pools, home prices increased at an annualized rate close to 5% in first quarter-2014, down from double-digit increases last year. The improvement in equity positions to date combined with the strong initial credit profile of the prime borrowers is reflected in the low delinquency rates. As of the most recent month's data, only 13 basis points of outstanding prime RMBS borrowers were delinquent.