The following is a press release from Fitch Ratings:
- Link
to Fitch Ratings' Report: EMEA Criteria Addendum
Greece
-
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=713734
- Fitch Ratings-London-25 July 2013: Fitch Ratings has updated its criteria
assumptions for assessing credit risk in Greek residential mortgage loan pools.
The updated assumptions are not expected to have any impact on the existing
Greek RMBS and covered bond ratings.
The continued strains in the Greek economy underpin the mortgage criteria
revision, with the main change relating to worsening house price assumptions in
light of a very weak housing market. In addition, Fitch's default expectations
on Greek mortgage pools have increased, mainly as a consequence of the agency's
recalibration of the probability of default (PD) matrix, and to a lesser extent
as a reflection of further deterioration in the performance of the Greek
assets. Furthermore, Fitch has lengthened its recovery timing assumption for
Greek mortgages to five years and introduced specific treatment for loans that
have been subject to restructuring.
House prices in
Greece
have
declined by 30% on average from their 2008 peak. Fitch expects Greek house
prices to suffer a further decline of almost 18% over the medium term, in the
context of the severe recession the country is going through and the
uncertainty surrounding the real estate taxation framework. Fitch has revised
upwards its average peak-to-trough house price decline expectation for
Greece
to
42% from 33% in nominal terms.
Fitch has increased its frequency of foreclosure (FF) assumptions for a 'Bsf'
rating to 16% from 7%. This is mainly attributed to a recalibration of the
agency's PD matrix based on the performance of vintages originated post-2005,
and is largely offset by lower origination vintage adjustments. Post-2005
vintages continue to perform substantially worse than seasoned ones. In
addition, there are still notable disparities in performance by vintage of
origination and by originator. To reflect this, Fitch will continue to apply
vintage adjustments according to the year of origination. These typically range
between 0.5x-1.2x of the standard loan FF.
Fitch believes that borrowers who have experienced problems servicing their
mortgages and who have thus opted for a "restructuring" package are
more susceptible to macroeconomic shocks. As such, the agency has introduced a
FF floor in the range of 40%-60% for loans that have been subject to a
restructuring.
The report entitled "EMEA Criteria Addendum -
Greece
:
Mortgage Loss and Cash Flow Assumptions", replaces the report of the same
name dated
8 August 2012
. The
report should be read together with "EMEA RMBS Master Rating
Criteria", "EMEA Residential Mortgage Loss Criteria", and
"EMEA RMBS Cash Flow Analysis Criteria", dated
6 June 2013
for a comprehensive
understanding of Fitch's approach to rating Greek RMBS.