Mexican non-bank institutions known as sofols and sofoms continue to see extraordinarily high delinquencies in their RMBS deals, according to a recent report by Fitch Ratings. Deals among these originators have seen 180-day-plus delinquencies as high as 40%.

The hardest hit loans are those that are denominated in the inflation index (UDIs). Fixed-rate peso loans have fared better.

Other kinds of originators are doing better than their sofol/sofom counterparts. Deals originated by government agencies Infonavit and Fovissste have 180-day-plus delinquencies that have stayed below 8% and 3%, respectively. The same figure for banks, meanwhile, has ranged between 8% and 12%, Fitch said.

Deteriorating performance among sofol/sofoms has led to servicer substitutions, which themselves have been beset with problems. The agency said it was “concerned that performance will be impacted by short-term disruptions that have stalled the recovery process for nonperforming loans and the changes in economic incentives embedded in each backup-servicing agreement.”

The nonbank originators have also been pursuing loan modification as a way to stem losses, which in Fitch’s view, could be raising the specter of moral hazard and actually encouraging borrowers to miss payments.

The bleak scenario for sofols/sofoms has had a dramatic impact on the make-up of RMBS issuance in Mexico. It is currently dominated by Infonavit and Fovissste. Below is a Standard & Poor's chart breaking down RMBS issuance by originator from 2003 to 2010.

The full report from Fitch on the current state of Mexican RMBS is attached.

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