Chile's domestic RMBS has lost a lot of friends over the last several months. An unprecedented jump in prepayment levels, particularly among prime borrowers, has led to downgrades in the sector and convinced investors that cashing out is the way to go. "There's no interest in investing [in this paper] at the moment," said an official at a Santiago-based insurance company.

While the damage hasn't deteriorated into defaults, investors have been turned off enough to prefer selling the collateral and foregoing the remaining yield than holding on. In the past several months, after consulting with bondholders, Banchile Securitizadora and BCI Securitizadora have sold the underlying portfolios of bruised deals they arranged. Two additional transactions from BanChile are understood to be in the process of selling off collateral and others might follow, sources said.

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