Non-conforming 30-day delinquencies stabilising

In analysing Australia's non-conforming securitised mortgage pool, Moody's Investor Service concluded last week that signs of stabilisation are appearing across most issuers for the 30 days past due delinquencies category. However, 90 days past due delinquencies continued to deteriorate in the first quarter of this year, reaching a record high of 10.17 per cent. Moreover, despite a reduction in the delinquencies pipeline, Moody's does not expect the 90 days past due delinquency bucket to fall in the short term as non-conforming borrowers continue to face difficulties in the credit market.

Nevertheless, the performance of the non-conforming sector has still been within Moody's expected levels to date, and has not warranted any rating action. Most outstanding notes have benefited from strengthening credit enhancement, while cumulative loss levels from the underlying mortgage pools are in line with Moody's initial rating assumptions.

Moody's observes however, that ultimate losses for non-conforming RMBS transactions will be largely driven by the geographic distribution and market value of the foreclosed properties.