NEW YORK--(BUSINESS WIRE)--Link to Fitch Ratings' Report: 2017 Outlook: U.S. & Canadian Structured Finance
Stability is largely in place for North American structured finance ratings next year, though some modest asset-level deterioration is likely as performance has peaked for many sectors according to Fitch Ratings in its 2017 U.S. and Canadian structured finance outlook report.
'Both prime and subprime auto ABS loss rates could be negatively impacted by weakness in the performance of longer term loans,' said Managing Director Rodney Pelletier. In fact, annualized net losses could reach 12% for subprime auto ABS in 2017, especially among the newer less-established subprime issuers that Fitch does not rate.
The performance of certain unsecured consumer loans could also come under pressure in 2017. Increasing competition among marketplace lenders is leading to higher than expected delinquency and loss rates. 'While marketplace lending firms have legitimate value propositions and apparent technological advantages, they have yet to prove their underwriting merit,' said Pelletier.
Performance is at or near peak in certain CMBS property types including hotel and multifamily. However, neither that nor a mixed picture for office and retail properties will be enough to dent rating performance for investment grade Fitch-rated CMBS. Also helping matters for CMBS is the feared loan maturity wall that has greatly diminished thanks to borrowers taking advantage of low interest rates by defeasing and refinancing their loans. This is not to say that some of the remaining loans won't run into some problems refinancing, though it will not be enough to affect investment grade CMBS.
Strong performance is in the cards for both RMBS & CLOs in 2017. The impact of risk retention will remain a question mark for new CLO issuance during the first couple of months of next year, though performance on existing CLOs will remain strong. Meanwhile, strong underwriting and positive home price trends have positively impacted collateral for new and recently originated RMBS.
'2017 Outlook: U.S. & Canada Structured Finance' is available at 'www.fitchratings.com' or by clicking on the above link.
Additional information is available on www.fitchratings.com.
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