Home Mortgage Losses on The Rise

The Britain’s residential mortgage market is going into loss and pushing non-conforming mortgage-backed securities downwards.

mortage rate fall

Non-conforming mortgages

Non-conforming mortgages are higher-risk mortgages, encircling sub prime borrowers who have poor credit histories and others who do not fit prime lending criteria for various reasons.


Fewer repossessions, and lower interest rates

According to Moody’s Investors service, the number of homes falling into repossession was lower in the second quarter than the first quarter. The interest rates have also reached the lowest in history, and some indexes show house prices have been rising for several months.

Nitesh Shah, who is an economist said that the delinquencies and losses continue to rise at a rapid pace as unemployment continues to rise.

Moody’s said that in 54 non-conforming transactions, out of a total of 88 outstanding deals worth 27.3 billion pounds, more than 20 percent of underlying loans were delinquent by more than 90 days. In the second quarter, six transactions fully depleted their reserve funds and when reserve funds are depleted, losses go the noteholders.

S&P said that the performance of mortgages underlying the Granite deals had been deteriorating for months, and the long-term arrears have reached 4.67 percent from 0.44 percent in September 2007, when the last Granite deal was issued.

Rise in repossession rates

Simultaneously, the repossession rates have risen to 0.87 percent, which is three times the level in the prime RMBS market, from 0.42 percent. S&P also calculated that the average losses per property have risen to more than 26,000 pounds from just under 15,000.

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