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Moody’s: ABS data showed signs of distress in June

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Asset-backed securities (ABS) data showed signs of stress in June in the EMEA region, and delinquencies for residential mortgage-backed securities (RMBS) continued to rise, although excess spread remained healthy, according to a report from Moody’s Investors Service.

 

Less than half of transactions reporting in June disclosed the level of payment moratoria in their pools.

Of those that did, June data showed 15% of RMBS portfolios were under payment moratoria on average, compared to less than 10% for ABS pools.

UK Non-conforming RMBS and small and medium-sized enterprise (SME) ABS, both at almost 30%, were outliers during the month.

Delinquencies rose across sectors for transactions reporting in June, with auto-ABS and SME ABS the biggest outliers with levels approximately doubling versus Q1 2020 levels.

Excess spread remained healthy and reserve funds largely fully funded.

Anthony Parry, senior vice president and manager at Moody’s, said: “Interest and scheduled principal receipts declined by 5-10% across most asset classes through June relative to the average in the first four months of 2020, with payment moratoria compounding the reduction in cashflows caused by rising delinquencies.

“Unscheduled principal receipts, from prepayments, remained subdued following declines in May, indicating fewer refinancing options for borrowers.”

 

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