Fitch Publishes Mexican RMBS Performance Update Report

MONTERREY, Mexico--()--Today Fitch Ratings published an updated version of its 'Mexican RMBS Performance Update Report'. This report provides an update to Fitch's review of the Mexican residential mortgage-backed securities (RMBS) market. As part of this overview, Fitch has presented performance data for each transaction as of Oct. 31, 2010.

During 2010, Fitch's Mexican RMBS portfolio experienced 25 negative rating actions on 17 different transactions; additionally, 52 tranches were affirmed. The majority of these downgrades were related to transactions backed by UDI mortgages originated by Sofoles/Sofomes, while the affirmations were mostly transactions backed by Peso-denominated loans as well as Cedevis and Fovisste bonds.

Similar to previous performance updates, this report summarizes the general performance of more than 80 tranches rated by Fitch. Additionally, this update also provides an initial analysis on loan modification programs and recoveries, as well as a section on the evolution of the servicer substitution related to the Credito y Casa and Su Casita transactions.

This initial analysis on restructured loans and recoveries provides a general overview on these market developments; nonetheless, the analysis has its limitations. In the case of loan modification programs, it only includes loans by Su Casita and a short time frame has passed since the initial restructuring date; as a result, more time is needed in order to have a more accurate view on how successful the loan modification programs are and determine the extent to which transactions benefit from these new products. Likewise, the recovery analysis only considers loans from GMAC and Su Casita and the recovered loans make up only a small number of the total non-performing loans. Fitch will closely monitor the evolution of recoveries as this is a critical element to our RMBS ratings.

Despite an economic recovery experienced throughout 2010, the performance of Mexican RMBS hasn't exhibited many signs of improvement. Delinquency levels rose across most transactions in Fitch's portfolio, though in some cases the pace at which they are rising has been slower than it was the previous year. Transactions sponsored by Sofoles, as in 2009, experienced the sharpest rise in delinquency levels. Furthermore, different transactions have started using and some have even depleted resources from their respective partial credit guarantee (PCG). On the other hand, most bank issued transactions, started to show early signs of stabilization.

Fitch expects a continued increase in delinquencies throughout the first half of 2011 within most of the UDI-denominated transactions originated by Sofoles. A rebound in the economy and employment, an increase in collections efforts, and a successful loan modification program would allow for the potential for stabilization during the second half of 2011. Two additional variables, ultimate recoveries achieved on foreclosed properties and non-performing loans, as well as the success rate of substitute servicers, will determine whether transactions are able to improve performance during 2011 and beyond. Peso-denominated loans and certain bank-originated transactions will continue to outperform UDI-denominated loans, as these loans were originated with higher underwriting standards and were directed mostly to higher-income individuals with stronger job stability.

New issues of Fitch's 'Mexican RMBS Performance Update Report' will continue to be published and can be found on the Fitch Ratings web site at 'www.fitchratings.com', under the following headers:

Structured Finance >> International >> Special Reports

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research: Mexican RMBS Performance Update

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=582545

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Contacts

Fitch Ratings
Eduardo Dibildox
Associate Director
+52 (81) 8399.9100
Prol. Alfonso Reyes No. 2612, Piso 8
Col. Del Paseo Residencial
Monterrey, Nuevo Leon
Mexico
or
Alejandra Gallardo
Analyst
+ 52 (81) 8399.9100
or
Pilar Montanes
Analyst
+ 52 (81) 8399.9100
or
Brian Bertsch
Media Relations, New York
+1-212-908-0549
brian.bertsch@fitchratings.com

Contacts

Fitch Ratings
Eduardo Dibildox
Associate Director
+52 (81) 8399.9100
Prol. Alfonso Reyes No. 2612, Piso 8
Col. Del Paseo Residencial
Monterrey, Nuevo Leon
Mexico
or
Alejandra Gallardo
Analyst
+ 52 (81) 8399.9100
or
Pilar Montanes
Analyst
+ 52 (81) 8399.9100
or
Brian Bertsch
Media Relations, New York
+1-212-908-0549
brian.bertsch@fitchratings.com