Arrears on residential mortgage loans underlying Australian prime residential mortgage-backed securities (RMBS) fell to its lowest level in a year, reaching 1.50 per cent in May 2009, a report by Standard & Poor’s has revealed.
The report said the federal government’s stimulus package had helped ease money stress. However, rising unemployment could fuel an increase in arrears in the future.
According to Standard & Poor’s credit analyst, Vera Chaplin, further economic softening would be felt by low documentation loan borrowers.
“Although arrears on low documentation loans that underlie prime RMBS have experienced a small drop in May, those that are greater than 90 days are still well above 2 per cent, reaching 2.16 per cent,” Ms Chaplin said.
Subprime RMBS arrears dropped to 15.09 per cent in May 2009, from 16.27 per cent in April, marking the biggest drop in the subprime Mortgage Performance index since March 2007.
While subprime arrears have fallen by 2 per cent in the past five months, in real terms, the figure is closer to a drop of $170 million, from a total of $754 million in January 2009, the report said.
This means a net portion of over 22 per cent of the subprime loans in arrears have either been cured or foreclosed.
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