CMBS and RMBS performing

Standard & Poor's last week provided updated data on the performance of mortgage-backed securities, and trends are promising for investors at least.

Probably of most relevance to investors, given the poor state of the commercial property market, is the fact that 10 CMBS transactions owing over A$4 billion have reached their scheduled maturity date so far this year and all have repaid in full.

Two more will reach their scheduled maturity date before year end. S&P goes on to note that another seven transactions, owing more than A$2.6 billion, will reach their scheduled maturity date in 2010.

S&P also released its RMBS arrears statistics as at the end of August 2009. Arrears on prime RMBS, rated by S&P, have continued to come down and are running at 1.28 per cent for arrears over 30 days. This compares well with the peak of 1.84 per cent seen in January 2009.

However, a more startling decline is seen in the value of prime RMBS outstanding, which has fallen to just A$102 billion at August 2009 from a peak of A$169 billion in June 2007. Outstandings have fallen by more than a third in a little over two years.

The credit qualities of prime Australian RMBS have been proven through the GFC and with amortisation of outstanding RMBS running well ahead of new issuance, the return of substantial real investor demand should not be far away.

Similar patterns can be seen in the data for sub-prime RMBS. Arrears over 30 days are down to 12.4 per cent from a peak of 17.1 per cent in January, while the value of outstanding sub-prime RMBS has more than halved to A$3.5 billion from a peak of A$7.5 billion in March 2007.