Standard & Poor’s Performance Index (SPIN) for May 2016 shows that 1.21% of high quality residential mortgage-backed securities (RMBS) were in arrears during the month, which is higher than the 1.14% reported in April. In fact this is the seventh month in a row that arrears have lifted. A year back the index was standing at 1.07%.
The index covers the universe of Australian RMBS rated by S&P. It measures the weighted-average arrears more than 30 days past due on loans in RMBS transactions. It is worth highlighting that it does not necessarily represent the entire market, as specific loan portfolios will be selected to package up and sell.
S&P says that the larger upward movements were in the major banks and other bank categories, while non-bank financial institutions was the only sector to see a decline in arrears. Most of the increase in arrears for the month was in the more severe category of 90-plus days overdue. The major banks’ 90 day-plus arrears rose four basis points to 0.48%, while non-banks fell a point to 17 basis points. This is an interesting observation as the major banks, in theory at least should have more sophisticated risk assessment capabilities.
They also say that the proportion of non-conforming loans in arrears increased to 4.71 per cent during the month from 4.25 per cent in April. However, note the non-conforming measure tends to exhibit some volatility from month to month and remains low by historical standards and well below the peak of 17 per cent in 2009.
