The share of borrowers pooled into Irish mortgage securitizations who have missed a payment should keep falling, according to rating agency DBRS.
The percentage that are more than 90 days late on their mortgage payment — a figure that has remained stubbornly high in Irish RMBS — is in particular expected to decline.
But certain particularities of the Irish market will keep the figure higher than in other parts of Europe.
DBRS anchored its view on an analysis of roll rates for past-due loans. Roll rates express the transition of a loan from one stage of missed payments to the next, and, ultimately, to default. They can also work in reverse. DBRS believes this figure can predict performance trends in RMBS and show how the macro-economy and servicing practices among banks shape that performance.
Using info from the European Data Warehouse on loans in nine Irish RMBS, DBRS found that the roll rate from current to past due has been slowing down.
Moving in the other direction, the rate from past due to current has picked up speed.
There was no clear trend in shift from past due to defaulted. A moratorium on foreclosures imposed at the height of the global financial crisis has kept this figure in check in Ireland. Its recent removal should have caused the past due-to-default rate to spike, but any movement isn't apparent, DBRS said.
The expected drop in past due loans is tempered by the fact that many delinquent borrowers in Irish RMBS pools haven’t made a payment in well over 90 days. “Lenders have to find a long-term solution in order to considerably bring down overall levels,” DBRS said.
In a December report, Moody’s Investors Service said that the share of loans in Irish RMBS pools that were past due 90 days or more had started to drop in 2014 after hitting a high of nearly 20%.
Relatively robust housing price growth and an improving economy — Irish GDP expanded by a real 2.5% in 2014 and is forecast to grow fast this year — are expected to further help the performance of Irish RMBS but doubts persists that the percentage of long-term past-due loans will fall by very much.
Among the factors preventing a steeper drop are the inadequate capacity of foreclosure courts and stifled demand from new home buyers as a result of limits to mortgage lending instituted by the Central Bank.