Spanish RMBS mortgage arrears began reversing the trend of a rapid increase in arrears that has been seen over the last two years. In the last quarter, the volume of loans falling into arrears actually decreased, according to Fitch Ratings.
Many of the loans that have been in arrears for an extended period have already been written off. This suggests that the types of borrowers that are more likely to fall into arrears have already been accounted for.
The provisioning mechanism in these transactions uses excess spread to offset loans that have been in arrears for between six and 18 months.
"It is unclear whether this decline will be sustained, as unemployment is expected to continue to increase and house prices are due to decline further,” said Santiago Isnardi, an analyst in Fitch's RMBS team. “However, this is a positive change in the performance of Spanish RMBS transactions."