The value of RMBS issues increased at 48% per annum from less than £5bn in 1997 to £77bn in 2004. Non-conforming players such as GMAC-RFC have become top ten lenders, and stock market analysts have been fulsome in their praise of the Kensington Group. However, questions posed by the capital markets as to the impact of rising possessions on their business models, fears of a deteriorating economy, and recent coverage in the financial and national press of the growth in sales of the 'first loss' tranches of mortgage backed securitisation transactions indicates banks and lenders are increasingly trying to minimise risk on their balance sheets and release capital in an increasingly unstable economy.
The Department of Constitutional Affairs has revealed that repossession orders were 58% higher than the previous year. According to the CML the number of UK home repossessions jumped by 22% in the second half of 2005, representing bad news not just for homeowners, but also for those mortgage providers operating RMBS models to grow their business.
As the race to sell off these portfolios most likely to default gains momentum, banks will want to make them as attractive as possible to potential investors.
In response L&E, a provider of title insurance products and services, is the first to create and launch a new application for title insurance which for the first time will actually guarantee protection for the investor from losses arising from title issues (such as fraud, forgery, negligence etc), increasing their marketability and saleability. Should a bank’s asset fail to securitise, this constitutes a claim under L&E’s new insurance policy, and they would cover the cost.
