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New York -- The increased presence of adjustable-rate mortgages, interest-only loans, payment-option ARMs and low-documentation products has not diminished the performance of residential mortgage-backed securities - yet, according to a recent report from Fitch Ratings.
Fitch said in its quarterly "Mortgage Principles and Interest" report that the presence of these new loan products in residential MBS hasn't had much impact yet, with the performance of 2004 and 2005 vintage pools similar to that of the 2003 vintage at a similar point of seasoning.
"A favorable housing market and interest rate environment has undoubtedly helped the performance of new products which may otherwise have come under greater pressure. Additionally, the payment shock risk of ARMs and interest-only products is not realized until ...
Source: HighBeam Research, Fitch Says Residential MBS Are Withstanding ARM Risk.