Mortgage Backed Securitisation pools rated by ICRA

ICRA Ratings has come out with its report on Mortgage Backed Securitisation (MBS) Performance. The rating agency has noticed that the prepayment levels across pools tend to be mainly Originator-specific.

Till date ICRA has rated 37 Mortgage Backed Securitisation (MBS)1 transactions originated by various banks and housing finance companies (HFCs), with the total rated amount exceeding Rs. 9,700 crore and all the transactions have involved either loans given to individuals for acquiring residential property or loans against property. The overall performance of the MBS pools rated by ICRA has been strong and remains consistent with the ratings assigned to the underlying instruments. The ICRA-rated MBS pools continue to be characterised by high collection efficiency levels and low delinquency. On an average the collection efficiency is above 98% and the loss cum 180 delinquency ratio is within 1.1%. Given the strong performance of the underlying pools, the overall credit enhancement utilisation has been low to moderate in all pools. The cash collateral utilisation has been nil in many pools and low in some others, the average cash collateral utilisation being less than 1.5%. Overall, the credit enhancement cover available is ample for the balance tenure of the transactions, which is a source of comfort for the investors in the transactions.

Strong credit performance demonstrated by ICRA-rated MBS Pools
In this section, we present an analysis of the performance of all the 282 live ICRA-rated MBS pools. Our analysis covers MBS pools across seven Originators and, therefore, does not suffer from Originator bias. Also, these pools belong to different origination periods - from 2003 to 2011. Unless otherwise mentioned, to ensure that the analysis presented below does not suffer from any Originator bias, we have depicted the movement only up to the 60th month post-securitisation for which data is available for pools of at least four Originators.

Low credit enhancement utilisation in ICRA-rated MBS Pools
On account of the high collections and overall favorable performance of the underlying pools, the utilisation of cash collateral as well as the overall credit enhancement in the MBS pools has typically been very low, in relation to the level available. In this respect, we have analysed the credit enhancement utilisation pattern across the 28 live ICRA-rated MBS pools in relation to their amortisation level as on September 30, 2011. We have classified the various pools in terms of their amortisation level and also the credit enhancement utilisation observed in these pools.

MBS transactions continue to be characterised by high prepayment of underlying loans
The prepayment rates have been observed to be higher for mortgage loan pools than for loan pools of other asset classes. The median Single Monthly Mortality (SMM) Rate6 for ICRA-rated MBS pools is around 1.1%. In the case of the 28 pools considered here, the rate of prepayment was found to be higher during the early period of the pools

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