KCP Special Report: When the Dust Settles, Part II - Expected Losses for 1995-2008 Vintages

NEW YORK--()--Kroll Bond Rating Agency (KBRA) releases a special report, “When the Dust Settles, Part II – Expected Losses for 1995-2008 Vintages”, which examines historical and projected losses for legacy conduit transactions issued between 2005 and 2008. The report is a continuation of an April 2019 release, “When the Dust Settles: Expected Losses for the 2005-2008 Vintages”, and an expansion of the original study to include pre-2005 vintage securitizations dating back to 1995. Similar to the last publication, the losses are examined by original certificate rating, and include projected losses from our KBRA Credit Profile (KCP) platform.

Expanding the examined cohort to transactions that were issued 10 years prior to 2005 resulted in a total study population of 523 conduits which had an original balance of $845.2 billion, that comprised approximately 9,655 certificate classes (super-senior tranches counted individually). As of the July 2019 remittance period, these transactions experienced aggregate realized losses totaling $58.0 billion (6.86% severity). A total of 281 transactions were retired, leaving 242 active deals secured by 1,565 loans with an aggregate unpaid balance of $15.7 billion.

Key takeaways from our observations and analysis throughout the report are as follows:

  • There was a material difference in losses experienced for conduits issued prior to 2005 and the peak issuance years of 2005-2008. Projected lifetime loss severities for the former ranged from 2.1% to 5.2%, with an average of 3.8%, while those for the peak years ranged from 6.7% to 16.2%, with an average 10.3%.
  • The average credit enhancement of the most senior certificate to incur a principal loss was more than 200 basis points lower (2.97%) for the pre-2005 vintages than the comparable figure for the entire pre-crisis cohort of 1995 to 2008 (5.04%).
  • Outstanding certificates from pre-crisis vintages as of the July 2019 remittance period were primarily concentrated among the 2005-2008 vintages, with balances ranging from $575.5 million (2008) to $7.5 billion (2007). Outstanding certificates for transactions issued prior to 2005 only accounted for approximately 6.67% of the aggregate outstanding balance of the pre-crisis cohort.
  • Not surprisingly, transactions within a given vintage that had lower cutoff LTVs and higher weighted average DSCRs and average debt yields generally had lower lifetime losses.

To read the report, click here.

About KBRA and KBRA Europe

KBRA is a full service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus, is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.

Contacts

Analytical Contacts:
Marc McDevitt, Director
(215) 882-5857
mmcdevitt@kbra.com

Laura Shannon, Managing Director
(215) 882-5860
lshannon@kbra.com

Steve Kuritz, Senior Managing Director
(215) 882-5866
skuritz@kbra.com

Contacts

Analytical Contacts:
Marc McDevitt, Director
(215) 882-5857
mmcdevitt@kbra.com

Laura Shannon, Managing Director
(215) 882-5860
lshannon@kbra.com

Steve Kuritz, Senior Managing Director
(215) 882-5866
skuritz@kbra.com