EMEA RMBS Performance Stable

Residential mortgage backed securities (RMBS) performance was stable across Europe, the Middle East and Africa (EMEA) during the first quarter of 2010, but some performance concerns persist, says Fitch Ratings in its latest quarterly update.

Loans in arrears by three or more months have been relatively stable for the last two quarters, excluding UK Prime and Irish RMBS which continue to deteriorate.

However, prepayment rates for EMEA RMBS have continued on a downward trend as European mortgage lenders continue to offer little incentive for existing borrowers to refinance.

"Although EMEA RMBS performance in general has seen improvements, the overall picture masks the poor performance of selected deals," says Peter Dossett, a director in Fitch's EMEA RMBS surveillance team. "Fitch remains concerned that the weak macro-economic environment has not yet fully impacted borrowers and that a further deterioration in performance could occur."

During the first quarter of 2010, Fitch downgraded 68 and upgraded 10 tranches across EMEA RMBS. The downgrades were related to UK non-conforming and Spanish RMBS. In addition, Fitch downgraded all senior bonds in Greek RMBS following the agency's 9 April 2010 downgrade of Greece's sovereign rating to 'BBB-'/Outlook Negative.

The full report, entitled "EMEA RMBS Q110 Update", is available on the agency's website at www.fitchratings.com.