Fitch: U.S. RMBS Turning the Corner in 2013; Fiscal Cliff Bears Watch
<0> Fitch: U.S. RMBS Turning the Corner in 2013; Fiscal Cliff Bears Watch </0>
<0> Fitch RatingsRui Pereira, +1-212-908-0766Head of U.S. RMBSorMedia Relations:Sandro Scenga, New York, +1 212-908-0278Email: </0>
The U.S. residential mortgage market is expected to continue on its positive trajectory heading into 2013, albeit slowly and not without some challenges, according to Fitch Ratings in its outlook report. One key area to watch will be the looming fiscal cliff.
Home prices will continue to be a key market driver next year. U.S. housing trends have clearly improved, with home prices in many regions stabilizing and some of the hardest-hit markets staging impressive turnarounds. However, the recovery will continue to be uneven with some markets lagging others due to local economic conditions and distressed inventory that still needs to be cleared. Weak fundamentals, such as high structural unemployment and lackluster wage growth, will also continue to be a drag on the housing recovery.
'New issue RMBS activity is likely to pick-up as a number of new entrants are already preparing to come to market with new private label deals next year,' said Managing Director and Group Head Rui Pereira. While a rapid influx of new deals is unlikely, growing investor demand, improving deal execution, and the resolution of Dodd-Frank provisions may lure some large banks back into the RMBS market. Collateral backing new issue transactions is expected to remain at the high end of the credit spectrum.
Another encouraging sign for RMBS is improving delinquency trends across most vintages (except pre-2005 deals) reflecting positive trends in the housing market. Rates of new delinquency improved to their lowest level since the onset of the financial crisis in 2007. While loss severities remain under pressure, Fitch also expects some improvement in 2013 as servicers continue to reduce advances and make greater use of short-sales as part of their default resolution strategies.
The looming fiscal cliff, however, is a near-term concern. 'Fallout from the fiscal cliff may induce another recession, which in turn may have a ripple effect on not just existing RMBS performance, but investor appetite for new transactions,' said Pereira.
Additional information is available in Fitch's report, 'U.S. Structured Finance 2013 Outlook: Tailwinds Prevailing Despite Potential Drag', available at ' or by clicking on the link at the end of the press release.
Fitch Ratings, One State Street Plaza, New York, NY 10004
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U.S. Structured Finance 2013 Outlook: Tailwinds Prevailing Despite Potential Drag