US Asset-backed Issuance Plummets 67% in 2008 First Half
Issuance of asset-backed securities (ABS) in the U.S. was hit hard by the crisis in housing and credit in the first half of 2008, totaling just $104 billion, compared with $318 billion in the first half of 2007, according to Moody’s.
The 67-percent drop in ABS issuance was paced by home equity issuance, which ground nearly to a standstill. Home equity ABS totaled just $1.8 billion in the 2008 first half, less than 1 percent of the $182 billion issued in the first half of 2007.
Home equity ABS tracked by Moody’s include traditional second mortgages, subprime loans, home improvement loans, high loan-to-value (LTV) mortgages and home equity lines of credit (HELOC).
Moody’s said stress in the mortgage market continues to hurt the performance of previously issued mortgage-related ABS, and the firm expects foreclosure and default rates on 2006-2007 issuances to continue to rise, as well as re-default rates on previously modified loans.
Until the housing market stabilizes and more streamlined modification plans kick in, the re-default rates are likely to remain elevated and foreclosures/losses likely to continue to rise.
Moody’s said other major asset classes also saw credit quality decline, but not as dramatically as home equity, and not at a greater magnitude than in previous economic downturns. Among those highlights:
–Credit card issuance rose 1 percent to $47 billion
–Vehicle issuance fell 23 percent to $32 billion
–Student loan issuance fell 35 percent to $21.5 billion
Details are available in ABS 2008 First Half Review: Credit Market Turbulence Leads to Substantial Decline in ABS Issuance.
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