Increasing home values will have only a limited benefit for residential mortgage-backed securities loss severities, because a rising proportion of liquidated RMBS loans are backed by properties that have been delinquent for three years or more, according to Moody’s Investors Service.

“The proportion of loans aged three years or more has increased to nearly 40% of all delinquent loans, meaning that the higher severities on aged inventory will continue to offset the effect of rising home prices,” Moody’s said in a report Tuesday. “Loans with a greater age in serious delinquency have higher loss severities because delays in liquidation cause expenses to accrue.”

The company’s researchers said, “Loss severities will remain high for at least the next year because of the time servicers will need to liquidate the high and rising proportion of aged loans in serious delinquency.”

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