On Sept. 18, we published "Impact Of Hurricanes Harvey And Irma On Rated U.S. RMBS Is Expected To Be Limited." Since then, we have expanded our analysis of residential mortgage-backed securities (RMBS) with hurricane exposure to include S&P Global Ratings-rated deal structures potentially affected by Hurricane Maria.
We focus on the following areas to account for the effects of Hurricanes Harvey and Irma:
- The 54 counties in Texas declared a state of disaster by the governor as of Aug. 27. The five parishes in Louisiana for which President Trump issued an emergency declaration on Aug. 27.
- The nine counties in Florida for which President Trump approved a disaster declaration on Sept. 10.
- The 30 counties in Georgia for which the governor declared a state of emergency on Sept. 7.
By including a broad selection of counties designated as areas needing emergency relief or funding, we believe that our analysis is conservative. We identified all deals with at least one loan in any of the affected counties mentioned above. Of these deals, we limited the analysis to deals for which the lowest-rated tranche is rated 'B- (sf)' or higher.
To account for the impact of Hurricane Maria, we have added any structure with exposure to Puerto Rico. We found that in addition to some small deals outstanding with loans collateralized by properties in Puerto Rico, one transaction has an unpaid balance of $553 million.
The total current pool balance of the transaction structures with loans in the affected counties is $147 billion. Of this total, $3.4 billion is exposed to Hurricane Harvey, $5.0 billion is exposed to Hurricane Irma, and $555 million is exposed to Hurricane Maria. This means that $9 billion out of $147 billion--or 6.2%--is directly exposed to the hurricanes.
We also determined each transaction's hurricane exposure as the ratio of the current loan balance for properties in disaster areas relative to the structure's overall balance (we excluded certain structures for which the loan count was de minimis). There are 319 structures that have exposure greater than 10%, with a total balance of $13.9 billion. Of this total, $821 million is exposed to Harvey, $832 million is exposed to Irma, and $554 million is exposed to Maria, for a total exposure of $2.21 billion (i.e., 15.9%). This represents about 1.5% of the $147 billion balance for all the deals with affected loans.
The table below lists the issue name and the series number of each structure that has greater than 10% combined collateral exposure to the hurricanes. We also list the size of each structure and the exposure as a percentage of the current balance for each of the three hurricanes. Excluding the $553 million Deutsche Mortgage Securities MLTS 2006-PR1, which is responsible for the bulk of exposure to Hurricane Maria, the average structure's current outstanding balance is $42 million, and some have balances of less than $10 million, suggesting these have been paid down substantially.
Assuming the affected loans default and have limited recoveries, we expect that the pools with exposure to Hurricanes Harvey and Irma would be able to sustain the losses. However, we could lower or raise our ratings based on changes in delinquency status in the short term, and on recoveries in the medium to long term. In the case of pools with exposure to Hurricane Maria, the heavy Puerto Rico concentration of the Deutsche Mortgage Securities MLTS 2006-PR1 pool suggests that some of the associated bonds will suffer losses and could be subject to rating actions in the future. S&P Global Ratings will continue to monitor the areas affected by hurricanes Harvey, Irma, and Maria, and will provide updates, as necessary, on the expected exposure to our rated RMBS.
To access the table 'Legacy U.S. RMBS Rated By S&P Global Ratings With Hurricane Exposure Greater Than 10%', click the below link.