Fitch Ratings says the outlook for the global residential market and RMBS ratings remains negative in 2009 as loan defaults are expected to increase while prepayments will slow considerably.
Downgrades will continue to significantly outweigh upgrades in 2009 across all rating categories. However, Fitch anticipates that, other than the U.S, the majority of rating actions for RMBS will be confined to lower-rated tranches and that highly rated 'AAA'/'AA' tranches are able to weather the current downturn.
For the second consecutive year, global RMBS experienced net negative ratings performance in 2008, with an upgrade-to downgrade ratio of 0.01 to one. Global RMBS rating statistics are dominated by the U.S., according to Fitch, as a result of its size and maturity, representing 91% of the 2008 cohort.
Furthermore, rating activity has been more pronounced in the U.S. compared with any other market because of the speed and extent of the deterioration in the U.S. housing sector.
"The 2008 transition statistics are heavily influenced by the more recent vintage years, 2006 and 2007 in particular," said Rodney Pelletier, head of EMEA structured finance performance analytics at Fitch. "In 2008, 15.1% of all 'AAA's were downgraded. However, this negative rating migration statistic drops to 3.9% if both the 2006 and 2007 vintages are excluded."