Fitch: Napa Earthquake Will Leave RMBS Unscathed

NEW YORK--()--The earthquake that struck Napa County, CA will not have any material impact on the ratings of RMBS 2.0 transactions, according to Fitch Ratings. Loans on Californian residences represent, on average, 45% of post crisis new issue prime jumbo RMBS. However, just 0.36% of loans (by balance) are secured by residential properties in Napa County.

Fitch-rated RMBS deals have comparable exposure at approximately 0.45%, ranging from a maximum of 1.67% for one 2014 transaction to eight transactions having no exposure to the area at all. Given average credit enhancement of roughly 1.1% across these deals for the most subordinate rated tranches ('BBsf'), Fitch considers these transactions to be well positioned to withstand any losses that may result from the quake.

We do not expect insurance proceeds to help mitigate property losses. Damage attributable to earthquakes is not covered under general homeowners insurance and most borrowers do not obtain additional coverage. In a statement released Aug. 24, the California Earthquake Authority estimates that just 10% of state residents have earthquake insurance policies. In Napa the average is 6%.

While the total cost of the damage is still being assessed, initial estimates from catastrophe experts, such as EQECAT, Inc. put losses in the range of $500 million to $1 billion. EQECAT expects roughly 25% to 50% of the losses to be attributable to residential property damage, but most of the impact is expected to be felt in the commercial sector by the region's wine industry.

Some market participants have indicated they plan to work with servicers to reach out to borrowers and potentially inspect properties for damage once aftershocks subside. Fitch will continue to monitor the situation as it unfolds and review the portfolio accordingly.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

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Contacts

Fitch Ratings
Vanessa Purwin
Senior Director
U.S. Structured Finance
+1-212-908-0269
33 Whitehall Street
New York, NY
or
Roger Lin
Director
U.S. Structured Finance
+1-212-908-0778
or
Rob Rowan
Senior Director
Fitch Wire
+1-212-908-9159
or
Media Relations
Sandro Scenga, New York, +1-212-908-0278
sandro.scenga@fitchratings.com

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Contacts

Fitch Ratings
Vanessa Purwin
Senior Director
U.S. Structured Finance
+1-212-908-0269
33 Whitehall Street
New York, NY
or
Roger Lin
Director
U.S. Structured Finance
+1-212-908-0778
or
Rob Rowan
Senior Director
Fitch Wire
+1-212-908-9159
or
Media Relations
Sandro Scenga, New York, +1-212-908-0278
sandro.scenga@fitchratings.com