Analyzing seasoned residential mortgage-backed security (RMBS) pools becomes more complicated as house prices fall further into depreciation. Taking a more representative view of full-documentation loan performance, current house prices and modification history may help rating agencies analyze seasoned pools in a changed environment, according to an independent credit rating agency. With loan-to-value (LTV) ratios climbing above 125% in some cases and poor collateral performance eliminating the chance to give credit to seasoned pools, rating agencies like DBRS must adapt evaluations. “They used to be golden! Few pools warranted lower credit enhancements than seasoned RMBS pools,” said DBRS in weekly structured finance commentary. Such is no longer the case, as the independent rating agency noted both stated and full documentation loans continue to perform poorly. “Therefore, in recent seasoned pools, DBRS has regularly mapped full docs to lower categories in our default analysis,” the agency said. “All else being equal, the resultant effect of less seasoned pool benefits, coupled with soaring LTVs, is naturally higher credit enhancement for seasoned pools.” DBRS also recommends accounting for price depreciation in evaluating seasoned pools. The agency adjusts for declined property values and stressed LTVs by updating properties to present value using the metropolitan statistical area data in the Standard & Poor/Case-Shiller index. DBRS then stressed the values further through Case-Shiller’s 12-month projection. Modification represents another complicating factor in evaluating seasoned pools. Modified loans are considered current in seasoned pools but carry a different risk due to the performance history and present a risk of re-default — or recidivism. “Due to high recidivism rates across all sectors, DBRS reviews all modified loans in conjunction with modification dates and pay histories,” the agency said. “To the extent that a modified ‘current’ loan has not demonstrated a consistently improved payment pattern for a minimum of one year, DBRS will revert its status back to delinquent when assessing the default frequencies.” Write to Diana Golobay.