Loan modification programs may help RMBS market stabilize in 2H11 - Fitch

Thursday, January 13, 2011

Successful loan modification programs would allow the potential for stabilization of the Mexican residential mortgage-backed securities (RMBS) market during the second half of 2011, Fitch associate director Eduardo Dibildox told BNamericas.

Despite the economic recovery throughout 2010, the performance of Mexican RMBS has not exhibited many signs of improvement, especially those sponsored by non-bank mortgage and construction lenders known as Sofoles, Fitch said in a recent report.

"Most of these credits have been restructured only recently, so we need more time to determine how successful they could be. But we see that these securitizations benefit from flows generated by modified loans instead of remaining non-performing (NPL) loans," said Dibildox, who is also one of the report's authors.

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"We keep monitoring sales of recoveries achieved on foreclosed properties, the performance of NPLs and the performance of restructured credits on a monthly basis."

Another variable that will determine whether transactions are able to improve their performances during 2011 and beyond is the success rate of substitute servicers, which were, and continue to be, carried out, Dibildox said.

Despite the fact that both a primary and master servicer change could have a positive effect on the transparency and overall collection results in the long run, it is worth mentioning that it will also generate additional costs to the structures, Dibildox said.

Fitch is expecting a continued increase in delinquency levels throughout the first half of 2011 for most of the inflation-indexed unit UDI-denominated transactions originated by Sofoles.

To read the full report in English, go to this link

To read the full report in Spanish, go to this link