None of the MBS or auto loan deals that have come out of Russia, Kazakhstan or the Ukraine has reported losses through the end of 2007, according to a performance report by Moody's Investors Service. RMBS delinquencies remain low as well, with four of 10 outstanding deals showing levels below 0.3%.

The constant prepayment rate for most RMBS has been high, averaging 20% in the second half of 2008, while total redemption rates in the auto loan class have generally been steep as well, at 40% and above.

Total issuance of MBS from the Commonwealth of Independent States (CIS) countries to date is $1.6 billion. Delinquencies of 60 days or more, while low overall, behave somewhat erratically in some deals. "This can be partly explained by differences in delinquency definitions and reporting among transactions," the agency said, acknowledging that the comparison among transactions wasn't entirely clean.

The prepayment rates for deals in the CIS are eye-popping by most standards. Kazakh MBS 2007, originated by BT Ipoteka, even breached 45% around September 2007, only to drop precipitously by November. This prepayment plunge was no doubt a result of the economy wide crimp on liquidity.

Moody's said borrowers in the CIS countries try "to repay their mortgage loans as fast as possible." In addition to this ingrained aversion to credit, Russians and Kazakhs have seen their salaries rise quickly on the back of swift energy-powered growth. Some borrowers even underreport their income or potential sources of income, making a suddenly bulky prepayment all the more likely, said a market source.

The prepayment rate refers to unscheduled principal payments and calculated as the principal collections in excess of the scheduled portfolio amortization, divided by the opening pool balance in each quarter. The figure is then annualized.

On the auto loan front, delinquencies vary sharply among deals, in part because two of the deals, Russian Car Loans, originated by Russian Standard Bank, and Roof Russia, originated by ZAO Raiffeissen, are still in their revolving periods, which tamps down the delinquency rate in those portfolios. Roof in particular has low delinquencies because it doesn't include a class of loans that is subject to a more relaxed set of underwriting criteria.

(c) 2008 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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