As negotiations between Greece and its official creditors drag on, more and more Greek homeowners are falling behind on their payments as well, according to Fitch Ratings.

While a deteriorating economy and almost total absence of bank credit are partly to blame, Fitch believes that some homeowners are also taking advantage of the extended period of uncertainty to withhold mortgage payments.

"Some mortgage borrowers may already be strategically entering early-stage arrears as the crisis damages the banking sector," the ratings agency stated in a report published Tuesday. "They may also be choosing to make payments on other debts rather than mortgages as they are aware that banks are unlikely to enforce against their property collateral."

Greek mortgage performance appeared to be stabilizing before the January elections. Loans with at least one monthly installment overdue represented around 16% of total loan balance. But they climbed to 16.9% in February in the aftermath of the elections, and continued to rise even after a temporary bailout program extension was secured at the end of that month, reaching 17.3% in May.

Fitch expects early-stage arrears to have increased further during June, which will result in additional arrears in residential mortgage-backeds.

"The failure to agree an extension of the existing bailout program, the announcement of a referendum and capital controls over the weekend, and popular opposition to austerity in Greece suggest that negotiating a third bailout program (or equivalent) will be challenging," the report states.

"The consequent uncertainty about Greece's relationship with its official creditors, and what this means for sovereign and bank liquidity and solvency, will therefore persist, potentially affecting borrower behavior."

Fitch rates 22 Greek RMBS tranches; 18 are rated at the country ceiling of B-sf/Negative. Further actions on the Greek sovereign would lead to the revision of the structured finance cap and subsequent rating actions on Greek structured finance program.

The report comes one day after Fitch downgraded the long- and short-term ratings of four Greek banks, National Bank of Greece, Piraeus Bank, Eurobank Ergasias and Alpha Bank to RD from CCC and C, respectively, following the announcement of bank holidays and capital controls, mainly restrictions on deposit withdrawals in Greece.

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