Moody's finds little increase in structured finance losses in 2006

In a new report entitled ‘Default and loss rates of structured finance securities 1993-2006’ published today, Moody’s finds that the rate of ‘material impairment’ of structured finance securities (defined as suffering interest shortfall, principal writedown of downgrade to Ca or C) was only slightly higher in 2006 compared to 2005.

For US home equity loan tranches the number of new impairments fell in 2006 compared to 2005. Out of a total of 10,927 home equity loan tranches outstanding at the beginning of 2006, 24, or 22%, were newly impaired in 2006, comments the report, compared to 0.33% in 2005.

In the CDO sector, Moody’s recorded only 12 newly impaired tranches in 2006, less than the 15 impairments in 2005. Eight of the 12 new impairments belonged to the high yield CBO and CLO categories and were issued during 1997-1999, write the reports authors.

Source: Moody's
Moody’s finds that the rate of ‘material impairment’ of structured finance securities was only slightly higher in 2006 compared to 2005