KBRA Releases Research – KBRA-Rated RMBS Exposure to Los Angeles Wildfires

NEW YORK--(BUSINESS WIRE)--KBRA releases research in response to potential exposure of our rated universe of residential mortgage-backed securities (RMBS) to the unfolding events surrounding the wildfires in Los Angeles, California, which began on January 7.

While it will take time to assess the ultimate impact of the fires, KBRA has identified the potential exposure of our rated RMBS universe to these fires through the utilization of FEMA disaster declarations. KBRA's analysis generally assumed that the most heavily affected regions are zip codes overlapping with areas under mandatory evacuation orders issued by the Los Angeles Fire Department. As events continue to unfold, our thoughts remain with the individuals and families affected by these wildfires.

Key Takeaways

• KBRA-rated RMBS transactions generally exhibit modest exposure to properties located in Los Angeles zip codes that overlap with mandatory evacuation orders, with an average transaction exposure of 1.3% by current balance.
• Twenty four KBRA-rated RMBS transactions have more than 5% exposure to properties located in affected counties.
• We anticipate that the vast majority of properties will have hazard insurance, including coverage for fire and smoke per government-sponsored enterprise (GSE) guidelines, with policies expected to be current due to servicer advancing and force-placed insurance protocols. While the industry has sufficient claims paying resources to cover current estimates of insured claims, the wildfires will significantly drive up the future cost of insurance premiums.

Click here to view the report.

About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU, and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

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