Fitch Special Report: Mexican RMBS Performance & Outlook for 2008

Business Wire, March 7, 2008

CHICAGO -- Today, Fitch Ratings released a special report titled 'Mexican RMBS Performance and Outlook for 2008'. The report presents an overview of the 2007 residential mortgage-backed securities (RMBS) market in Mexico, Fitch's 2008 sector outlook, as well as a detailed performance analysis of the transactions currently rated by Fitch.

During the second half of 2007, investors scrutinized the Mexican mortgage and RMBS market, questioning the isolation of the Mexican mortgage market from the U.S. subprime crisis. In September, Fitch performed a review of its current portfolio and affirmed 27 series of notes, and in general delinquency and prepayment levels have been in line with Fitch's initial expectations. 'Fitch concluded that many of the factors leading to the destabilization of the U.S. RMBS market are not present in either the Mexican mortgage market or securitized mortgage pools,' said Matias Acevedo, Senior Director in Fitch's Latin America Structured Finance Group.

For example, adjustable-rate loans and general arm products have not yet been securitized in Mexico; origination policies and the underlying borrower's credit metrics are relatively standard, particularly given the fact that the Sociedad Hipotecaria Federal (SHF) reunderwrites all loans; and mortgage brokers and other credit shortcuts do not exist, which helps to avoid the disalignment of interests between market participants. Additionally, there is a large housing deficit in Mexico, while a strong demand profile mitigates the risk of market value declines.

Nevertheless, the local market was not immune to the subprime crisis unfolding in the United States. During the second half of the third quarter 2007, crisis repercussions caused a constraint on liquidity with just one RMBS transaction closed. Although issuance rebounded in the fourth quarter in Mexico, local investors have been pulling back from this sector, monoline activity has ceased and Fitch expects a further repricing of risk during 2008.

Going forward in 2008, in an effort to improve surveillance on RMBS transactions in Mexico, Fitch will introduce quarterly newsletters that will provide investors with a detailed and periodic analysis on market developments and performance on Fitch-rated transactions.

The full special report, 'Mexican RMBS Performance and Outlook for 2008' is available on the Fitch Ratings web site, www.fitchratings.com.

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