Fitch: U.S. Structured Finance Turns the Corner to Stable in 2011

NEW YORK, NY--With  the  economic  recovery slowly underway, U.S. structured finance will begin  to fully implement its ‘lessons learned’ and turn the corner towards stability next year, according to Fitch Ratings in its 2011 Outlook report.

Fitch’s Rating Outlook for U.S. Structured Finance is Stable.

From  a  new  issuance  perspective, 2011 will bring an increased amount of transactions that continue to employ a ‘back-to-basics’ approach, according to  Kevin  Duignan (top right photo),  Group  Managing  Director  and head of U.S. structured finance  for  Fitch.

 “New  structured  finance  deals  will  see continued improvement  in  loan  quality  and will be issued by higher credit quality sponsors employing less complex structures,” said Duignan.

The  sector best-positioned for positive performance next year is U.S. ABS, with  delinquency  and  loss  metrics  better  than they have been in years across  several  asset  classes.

 “With  ABS  exhibiting  impressive rating stability  in  the  face of substantial recessionary headwinds, the outlook for the sector looks even better,” said Duignan.

The  picture  gets  murkier  when  delving into mortgages. The inventory of

specially  serviced  U.S.  CMBS  loans  remains  high,  though  the rate of

transfers  has slowing. Additionally, “liquidity is returning to the market

which should help improve rating stability for CMBS in 2011,” said Duignan.

In  U.S.  RMBS,  property  prices  are rebounding in many markets. However,

affidavit  issues  surrounding  judicial  foreclosure  processes  figure to

increase   an  already-huge  shadow  inventory  of  distressed  and  unsold

properties.

According to Duignan, “The foreclosure issues will cast further

a pall on a housing recovery that was slow out of the gate to begin with.”

Lastly, for one of the most negatively impacted sectors, the worst appears

to  be  finally  over  for  U.S.  Structured  Credit.

“The picture for CLOs appears brightest in 2011,” said Duignan, given the declining default rates observed  in  the  high-yield sector.

 However, structured finance CDOs with exposure  to  CMBS may see some marginal downgrades in 2011 due to pressure in  the  underlying  CMBS  sector. 

Bank  TruPS CDOs will continue to face, albeit slowing, deferrals and defaults.

Fitch  will  be  discussing  its  2011  Outlook for U.S. structured finance

during  a  webcast to take place on Thursday Dec. 9 at 11 a.m.

‘U.S. Structured Finance  2011  Outlook: Turning the Corner’ is available by clicking on the link or by going to http://www.fitchratings.com/ under ‘Latest Research’

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Contact:

Kevin Duignan

Group Managing Director

+1-212-908-0630

Fitch Inc., 1 State Street Plaza, New York, NY, 10004

Zanda Lynn

Managing Director

+1-212-908-0601

Media Relations: Sandro Scenga +1-212-908-0278, New York.

Additional information is available at http://www.fitchratings.com/