Mortgage delinquencies on Residential Mortgage Backed Securities (RMBS) rise over the past year according to Moodys

Ratings Agency Moody’s released their annual Mortgage Delinquency Report this week which showed delinquencies have increased over the year as consumer confidence dipped, property values fell and global economic conditions weakened.

According to the report, the analysis in this report was performed on over $117.6 billion worth of mortgages which are included in Moody’s-rated residential mortgage backed securities (RMBS) portfolios. They represent about 10% of Australian’s $1.1 trillion mortgage market and are considered a suitable proxy for market trends.

It is important to note that the RMBS market is a small fraction of the overall mortgage market with the vast majority of home loans originated and maintained through bank funding.  In most instances RMBS are undertaken by second tier banks and building societies.  Nevertheless, the report does highlight some important trends.

The report states that the national delinquency rate has increased to 1.67% between March 2010 and June 2011 from 1.36%.  The table below indicates the performance of markets by delinquency classification.

As you can see, the number of poor and very poorly performing regions has increased from just seven in 2010 to 28 regions currently.  Despite these figures clearly highlighting growth in delinquencies, the vast majority of regions (37) are performing satisfactorily or better.

The table also highlights that there is 11 regions performing extremely poorly and these regions are detailed below.

New South Wales and Queensland account for 10 of the 11 very poorly performing regions. The New South Wales results are reflective of the weak property value growth conditions persistent since early 2004 (despite strong growth recently) and in Queensland it is reflective of the extremely weak recent performance of coastal markets.

Overall the report highlights the weakness currently occurring in the housing market however, it is important to note that it refers to only a small portion of the overall market and is reflective of loans occurring away from the big 4 banks.  In some instances, by no means all, these loans may have been offered to applicants that had been considered inappropriate for a home loan by the major banks.

The report does echo broad trends however, given it is based on a sample of just 10% of the market and loans originated away from the 4 major banks I suspect it may be overstating delinquency rates somewhat.  In saying this, I do believe the trend is correct with a greater number of mortgages falling delinquent. Let me know what you think about these findings?

About Cameron Kusher

Cameron Kusher is Head of Research at CoreLogic, specialising in primary and secondary data analysis, property market commentary and consultancy. Cameron has a thorough understanding of the fundamentals such as demographics, trends, economics and spacial analysis and is a regular keynote speaker for property-related groups, regulated industry bodies, corporations and the government sectors. Follow Cameron on Twitter @cmkusher

Connect with CoreLogic

Enter your email address to subscribe to our e-newsletter, and have new posts delivered via email. You can also connect with CoreLogic on social media.

One Response to Mortgage delinquencies on Residential Mortgage Backed Securities (RMBS) rise over the past year according to Moodys

  1. Theresa Arendse-Martin September 30, 2011 at 3:13 pm #

    Good day Cameron
    Very interesting reading.
    I would be even more intrigued to know the level of delinquencies in homeloans offered by the 4 banks as opposed to the data provided above.
    That would put the above trend into an appropriate context which provides a trend for the overall homeloan market.

    Your thoughts are welcome.

    Thanks Theresa

Leave a Reply

Notify me of followup comments via e-mail. You can also subscribe without commenting.