Reuters: Financial Services and Real Estate: TEXT-S&P releases fiscal 2012 performance otlk report on Japan RMBS

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TEXT-S&P releases fiscal 2012 performance otlk report on Japan RMBS Mar 29th 2012, 07:00 Thu Mar 29, 2012 3:00am EDT (The following statement was released by the rating agency) March 29 - Standard & Poor's Ratings Services today said that it has published a Japanese-language report on its performance outlook for Japanese residential mortgage-backed securities (RMBS) transactions in fiscal 2012 (ending March 31, 2013). In the report, we state our view that the performance of the underlying asset pools of Japanese RMBS transactions and the ratings on the transactions themselves are likely to remain stable overall in fiscal 2012, despite the adverse, albeit limited, effect of the Great East Japan Earthquake and tsunami of March 11, 2011. On the other hand, because we also discussed the continued likelihood that we could lower our ratings on some regular monthly notes issued by Japan Housing Finance Agency (JHF; AA-/Negative/A-1+) in 2009 and some condominium investment loan-backed RMBS transactions, we consider the outlooks on the ratings on these transactions as negative. The report explains our views on the performance in fiscal 2012 of residential mortgage loans, condominium investment loans, and apartment loans, all of which are important asset classes of Japanese RMBS transactions. We developed our outlooks for the performance of the underlying assets and the ratings on the transactions in fiscal 2012 after examining our prospects for the Japanese economy as well as the conditions affecting each asset class. Key factors of the report are as follows. -- In fiscal 2012, we expect the overall default rate of RMBS issued by private-sector entities to fall slightly from the previous fiscal year, in tandem with an expected drop in the default rate of some private-sector RMBS transactions backed by housing loans that were extended to borrowers with relatively low creditworthiness. We believe that the outlooks for the ratings on residential mortgage loan-backed RMBS transactions in the private sector are likely to be stable, based on our expectation that the recovery rates and prepayment rates of such RMBS remain within the ranges we originally assumed. -- We expect the replacement and withdrawal ratios of regular monthly notes issued by JHF to drop slightly from the current levels in fiscal 2012 because the replacement and withdrawal ratios of the monthly notes that JHF issued in 2008 and 2009 are likely to continue to fall, in our view. Meanwhile, we expect the replacement ratios of JHF's Series S notes to continue to rise slowly as the underlying assets of the notes age further. We consider the outlooks on ratings on regular monthly notes issued by JHF as stable overall. However, the outlooks on ratings on some regular monthly notes issued by JHF in 2009 are negative. -- Regarding RMBS transactions backed by condominium investment loans, comprising mainly loans extended to middle to upper income groups, we take the view that the performance of the underlying assets of these transactions and the ratings on the transactions themselves are likely to be stable. On the other hand, because we continue to regard the weaker creditworthiness of some obligors of condominium investment loans as a key factor for the credit quality of the RMBS transactions that are backed by loans extended to such obligors, we consider the outlooks on the ratings on these transactions as negative. -- As for RMBS transactions backed by apartment loans, we expect income from underlying asset pools to remain stable overall in fiscal 2012. Repairs of most of the collateral properties that were damaged by the March 2011 earthquake and tsunami have either begun or been completed, and some of these properties have resumed operations to generate profits. We continue to regard deterioration in the credit quality of RMBS transactions backed by apartment loans as unlikely. Link this Share this Digg this Email Reprints

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