The economy in the Republic of Ireland fell into a deep recession with the global financial crisis, dragging down mortgage performance with it. Average delinquency rates among prime Irish residential mortgage-backed securities (RMBS) have risen to 3.9% from 2.1% in March 2008, while 90+ day delinquencies in particular more than doubled to 1.5%, according to a report by Standard & Poor’s. Despite rising delinquencies, however, S&P notes few repossessions so far and negligible losses. “This could be due to a number of factors; we understand that the legal system, for example, is generally considered to be ‘borrower-friendly,'” said S&P credit analyst Kate Livesey. “Furthermore, the introduction of schemes such as the Code of Conduct on Mortgage Arrears, which prevents lenders from entering court proceedings until at least six months after arrears first arise — or 12 months in some cases — could also be lengthening the time from first arrears to repossession.” Irish mortgage loans show traditional strong performance in the last 10 years, supported by rising house prices and low unemployment levels, but harsh recessionary conditions like higher unemployment and price depreciation pressure borrowers. Despite the poorer performance, prepayment rates typically seen among refinances fell to less than 10% from a peak of almost 50% among the two nonconforming Irish RMBS transactions S&P tracks. The ratings agency attributed constrained credit availability to these slowed prepayments. Write to Diana Golobay.

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