Moody’s Sees Weak Irish Mortgage Securities Market

Moody’s Investors Service put 15 classes of notes in seven Irish residential mortgage-backed securities (RMBS) on review for downgrade on declining performance. The rate of 90 plus-day delinquencies rose to 2.3% of the current balance in Q209 from 1% in the year-ago quarter. The higher delinquency rate comes on the heels of greater unemployment, which rose to 11.7% as of June, from 10% in March. The Irish RMBS market continues to issue despite low mortgage originations. Issuance reached €25.8bn (US$36.7bn) in all of 2008 and €3.8bn in the first half of ’09. “The Irish economy is in a deep recession,” Moody’s said in an international structured finance report. “Reduced global demand and falling property prices are the main drivers of the current recession. A painful de-leveraging process will have to be endured as households reduce indebtedness in the new environment.” Falling exports led to the shrinkage of the Irish economy, which drives unemployment higher and house prices lower. The weakening real estate sector poses a major problem for the Irish banks, Moody’s notes, all of which may require outside support in the future. The two largest Irish banks — Allied Irish Banks and Bank of Ireland — already received government support in Q109, but the recent downgrade of the Irish government to ‘Aa1’ from ‘Aaa’ weakened its ability to provide more support. Write to Diana Golobay.