KBRA has published new research examining the key characteristics of Spanish reperforming loan residential mortgage-backed securities transactions that the agency rates.
The report focuses on factors likely to influence credit performance as the transactions mature and season over time.
Analysis covers the composition of underlying mortgage portfolios, including restructuring profiles, arrears trends, pay rates, leverage, seasoning, and kept-rate performance.
Structural features designed to mitigate liquidity risk and credit losses are also assessed in detail within the research publication.
Spanish RPL portfolios typically include a high proportion of restructured loans, which generally carry higher re-default risk than loans with no restructuring history.
The share of restructured loans is described as an important portfolio characteristic, alongside restructure type, time since restructuring, kept rate, arrears status, and pay-rate performance.
Restructure type helps indicate the nature of prior borrower financial stress, with grace period restructures potentially signalling more acute stress and creating payment shock risk when scheduled payments resume.
Term extensions, by contrast, may provide a more durable reduction in monthly debt service in cases where borrower affordability has weakened considerably.
Restructure age and kept rate are considered most informative when the post-restructure observation period includes periods of borrower stress, such as the higher interest rate environment seen in 2023 and 2024.
Arrears data are described as most useful when considered alongside pay rates, with sustained pay rates above 100% indicating curing behaviour among borrowers.
Weaker pay rates in deeper arrears may signal continued deterioration and a higher likelihood of foreclosure proceedings being initiated against affected borrowers.
Spanish RPL RMBS structures use liquidity and deleveraging features, including reserve funds, principal-to-interest mechanisms, interest rate hedges, target amortisation, arrears-based provisioning, and junior interest subordination triggers, to address key risks.
Together with seasoned collateral and ongoing amortisation, these structural features support KBRA’s expectation for broadly stable performance over the next two to three years.
Performance data show transaction-level dispersion, with arrears trends varying by vintage and portfolio profile across the rated transactions.
While some transactions have experienced higher arrears, pay-rate trends indicate that many borrowers continue to make payments, and cumulative losses remain low across the transactions.
KBRA is one of the major credit rating agencies and is registered in the US, EU, and the UK, and is recognised as a Qualified Rating Agency in Taiwan.