Fitch Ratings said today that approximately 30% of all repossessions in the U.K. in 2008 came from defaults of nonconforming borrowers, even though the sector only comprised under 10% of the entire U.K. mortgage market.

Approximately 12,200 properties repossessed during the last year were secured by a non-conforming mortgage. The number of repossessions also gathered pace during the year, with more properties repossessed in the fourth quarter than in each of the previous three quarters, according to data compiled by Fitch.

"As expected non-conforming borrowers are hardest hit in the current downturn," said Peter Dossett, associate director in Fitch's RMBS performance team. "This has, and will continue to have, a direct affect on the ratings of U.K. nonconforming transactions." 

Dosset explained that the higher stress assumed by Fitch meant that U.K. nonconforming RMBS would need more credit enhancement to achieve the same rating as a transaction containing prime collateral.

Despite these harsher assumptions, the severity of the current downturn and the subsequent stress to RMBS transactions has resulted in the ratings of 285 tranches of UK non-conforming tranches being downgraded by Fitch in the last year.

The agency expects that given current market conditions further downgrades are likely, reflected in the 204 nonconforming tranches now assigned an Outlook Negative.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.