Fitch: Asset-Backed Commercial Paper Pulling Back from Residential Mortgages

Traditional U.S. asset backed commercial paper programs significantly reduced exposures to collateralized debt obligations and residential mortgage collateral throughout 2007 and into the first quarter of 2008, Fitch Ratings said Monday.

An analysis by the rating agency found overall exposures to CDOs and residential mortgage collateral contracting at a much faster pace than the overall ABCP market since the start of 2007, and non-mortgage consumer assets — along with corporate exposures — growing substantially.

Results of Fitch’s portfolio composition analysis indicated that total residential mortgage exposure declined 59 percent on a dollar basis to $9.4 billion since the end of 2006. Over the same period, CDO exposures across Fitch’s rated U.S. multiseller and securities-backed universe fell 24 percent to $13.9 billion.

Overall ABCP outstandings have declined by more than 27 percent during the same period and 35 percent since peaking in July, Fitch said.

As a share of total traditional program outstandings, residential mortgage collateral now comprises approximately 4.2 percent and CDOs represent 6.2 percent — indicating just how quickly mortgage-related assets have fallen out of favor.

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