Greek mortgage-backed securities continue to weaken

The performance of the Greek residential mortgage-backed securities (RMBS) market continued to weaken during the three-month period up to August, according to the latest indices published by Moody's Investors Service.
In August, 90+ day delinquencies of Greek RMBS transactions increased, but remained in a narrow and low range between 1.4%-3.0%, with the exception of one transaction. The weighted-average 90+ day delinquency trend increased to 5.2% of the current balance in August, up from 4.0% in August 2012. In the same period, the 90+ day delinquencies in Estia Mortgage Finance II PLC's underlying asset pool, the worst performer in the Greek RMBS market, rose to 9.9% from 7.0%.
Similarly, cumulative defaults increased, but remained in a narrow and low range between 0.5%-1.4% of the original balance, with the exception of Estia Mortgage Finance II PLC, which recorded 5.9% in August. The weighted-average cumulative default trend increased to 1.8% of the original balance in August, from 1.3% in August 2012.
The continuing deterioration in performance is driven by the weak economic environment and high unemployment levels in Greece. The rating agency said that while the reserve funds of three transactions are currently below their target levels, no transactions have fully drawn their reserve funds.
In August, the current outstanding pool balance of Greek RMBS transactions was EUR 2.6 bln, compared with EUR 2.9 bln in August 2012, a 10.7% year-on-year decrease as a result of planned amortisation. In total, 11 Moody's-rated RMBS transactions launched since 2004 have been included in the index. The number of transactions has decreased over time and currently only seven transactions remain outstanding.