Fitch Sees Weakness in Many re-REMICs

The performance of mortgage pools that support the senior bonds in many restructured REMIC securities are performing worse than other loan pools, according to Fitch Ratings. The Fitch analysis found that loan groups in re-REMIC bonds have delinquency rates that are 25% worse on average than loan pools outside of re-REMIC transactions. Fitch said its approach to analyzing re-REMIC bonds analyzes each loan group independently to ensure that the underlying credit support justifies the rating on the senior bonds. In response to deteriorating residential MBS performance, issuers are re-securitizing the senior notes to create additional credit support. The restructured REMIC results in two new bonds, a senior bond with more credit protection and a subordinate bond with the same credit support as the underlying bonds. "As long as the additional credit support from the new subordinated bond is sufficient, the senior bond of the re-REMIC should continue to maintain its 'AAA' rating even if the underlying bonds are downgraded," said Huxley Somerville, the head of Fitch's U.S. RMBS group. The full report can be found at: http://www.fitchratings.com/corporate/sectors/special_reports.cfm?sector_flag=3&marketsector=2&detail=&body_content=spl_rpt