Russian originators are using credit bureaus more and more to assess the suitability of borrowers, according to a report by Moody’s Investors Service.
And this, the agency added, is a credit positive for securitizations.
“Credit bureau information allows for the proper verification of obligors’ historical ability to pay, which is particularly important because of the high number of obligors in Russia receiving grey income,” the agency said.
Grey income refers to income that is not verifiable through official tax documents. In Russian RMBS transactions, an average of 40% of underlying mortgages are linked to borrowers who earn some grey income.
Before the financial crisis, Russian originators rarely submitted or obtained information from credit bureaus. In the past few years this has been changing.
At least part of the reason is legislative. Originators are required by law to submit information on their borrowers to at least one credit bureau. As a result, these borrowers are building credit histories.
Still, Moody’s questioned the accuracy of the data culled by credit bureaus in Russia. This is particularly an issue for borrowers put into the system when bureaus first started up. “As a result, some older credit history records may be unclear or inconsistent,” the agency said.