Mortgage Finance Gazette
According to a survey by Fitch Ratings, RMBS (residential mortgage-backed securities) will replace consumer ABS (asset-backed securities) as the segment with the most active issuance.
Four out of 10 (40%) of respondents voted for RMBS – up on the 20% last year – followed by 27% for Consumer ABS (37% last year).
Andrew Currie, head of surveillance of structured finance ratings across EMEA at Fitch Ratings, said the performance of European RMBS has been generally stable over the last 12 months.
He noted that there is good data available but there are inconsistencies in the quality and quantity of information provided by issuers.
Currie said: “The UK has seen the return of specialist lenders seeking to tap into the RMBS market for funding. Such lenders often have a limited track record, which brings extra analytical challenges when assessing risks associated with loan books. Analysis relies on identifying the similarities and differences with other more established lenders.”
ABS
One third (34%) of respondents expected 2016 ABS issuance volumes to beat last year’s levels, significantly down from the 59% who saw a year-on-year rise in 2015.
Overall, 34% expected a fall in issuance this year from 2015’s €96 billion, while 32% felt 2016 volumes would be in line with last year. Of the 34% who expected a rise, just 7% thought it would be by 25% or more, while 27% thought it would rise between 10% and 25%.
CMBS
The segment expected to see the least issuance was again CMBS (commercial mortgage-backed securities), with 5% of votes (12% last year). 15% voted for Structured Credit (31% last year), whilst 13% expected no growth in any sector.
Regulatory uncertainty
Similarly to last year’s results, regulatory uncertainty continued to be seen as the biggest influence on issuance expectations with 51% of the votes (compared to 60% last year).
This was followed by 44% for Brexit uncertainty, with just 3% pointing to the improving economic climate and 2% choosing the emergence of new asset classes such as marketplace lending as more positive factors.
Marjan van der Weijden, Fitch’s EMEA head of structured finance, said: “Issuance expectations are a good barometer for overall confidence levels towards the European structured finance market. Our survey results show sentiment is more muted this year, with regulatory uncertainty remaining the biggest driving factor.”
“Regulatory measures such as the ECB’s ABS purchase programme and the EC’s STS securitisation proposals have the ability to provide investors with greater confidence. We continue to believe that confidence would be improved by other regulatory measures, specifically, a reduction of capital charges that securitisation investments attract for banks and other institutional investors.”
