Fitch Ratings say in a new report that the performance of Greek mortgages continued to deteriorate in Q212, against a backdrop of extremely weak housing markets and intense crisis in the broader economy.
Fitch΄s Greek RMBS Index of three-month plus arrears excluding defaults continued its climb, increasing to 4.6% in Q212 from 4.1% in Q112.
“The persisting crisis in Greece has had a direct impact on borrowers΄ ability to meet their mortgage obligations. This is reflected not only in the higher arrears levels, but also in a greater proportion of loans rolling into default instead of being cured,” says Andrew Currie, Head of Surveillance for EMEA Structured Finance. “In fact, the constant default rate across RMBS transactions reached a high of 1.9% in Q212, nearly doubling the previous quarter΄s figure of 0.9%.”
Despite the steady increase in the proportion of loans classified as defaulted, cash flows from recoveries have been limited.
“There is very little demand for property given the extremely tight credit conditions and uncertainty about the economic outlook,” says Gioia Dominedo, Senior Director in Structured Finance Surveillance. “Even if buyers for repossessed properties could be found, government legislation currently restricts banks from enforcing mortgages against defaulted borrowers.”
The combination of increased defaults and low recovery cash flows has affected the performance of RMBS transactions by compressing excess spread levels and, in an increasing number of cases, creating a requirement for reserve fund drawings in order to cover note-level shortfalls. This is evidenced in net excess spread levels, which decreased to 0.7% in Q212 from 1.0% in Q112. Of the 11 outstanding Fitch-rated Greek RMBS transactions, seven reported either negligible or no net excess spread in Q212.
The report, entitled “Mortgage Market Index – Greece”, is available at www.fitchratings.com. It analyses trends in the Greek mortgage market, as well as providing information on Fitch-rated Greek RMBS series as of end-Q212.
(source: Capital)
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