Moody's expresses concerns over mortgage ABS

Recent trends in the mortgage sector of the ABS market have had positive impacts to date, but presenters at last week's Moody's Investors Service RBMS Investor Briefing raised red flags over recent vintage transactions. In particular, the increase in interest-only products and modified loans, combined with the decline in applicant documentation, may spell trouble for the sector going forward, Moody's analysts said.

There have been some positive developments in the sector, primarily the increased due diligence in home appraisal valuations resulting from investment bank shelf deals. Of the record-breaking first-quarter supply, two-thirds was issued by investment bank loan acquisition shelves.