Only one borrower out of 1,800 newly originated prime loans backing Fitch-rated U.S. residential mortgage-backed securities is delinquent, the ratings giant said.
That stellar record applies to prime loans securitized in five private-label RMBS deals since the start of 2010, Fitch reported. All of the deals were issued by Redwood Trust (RWT).
The one delinquent loan is expected to be remedied with the borrower possessing a 50% loan-to-value ratio and the existence of liquid reserves that are currently in excess of that loan amount.
About 75% of the loans issued in 2010 have already repaid in full, which could have a modest impact on the credit strength of the remaining mortgage pools, Fitch said.
"Relative to the initial pools, remaining borrowers have smaller loan amounts, lower credit scores and higher LTVs. However, all compositional changes have been relatively minor to date," the report said. "As such, Fitch does not believe that the prepayments have resulted in a material change in credit risk in the remaining pools thus far."
Still, Fitch believes risks will be mitigated through "subordination floors designed to mitigate tail-risk as pools pay down."