Fitch: U.S. Structured Finance Ratings Outlook Stable

According to Fitch Ratings in its 2017 Outlook: U.S. & Canadian Structured Finance report, stability is largely in place for North American structured finance ratings for 2017, though some modest asset-level deterioration is likely as performance has peaked for many sectors.

Fitch predicts that annualized net losses for subprime auto ABS could reach 9-12 percent in 2017, particularly for less established sub-prime issuers Fitch does not rate. The rating agency adds that in certain CMBS including hotel and multifamily, performance is at or near peaks but "neither that nor a mixed picture for office and retail properties will be enough to dent rating performance for investment grade Fitch-rated CMBS". Fitch adds that the CMBS outlook is more positive due to the greatly diminished fear over the loan maturity wall, thanks to borrowers taking advantage of low interest rates by defeasing and refinancing their loans.

The rating agency expects RMBS and CLOs will perform strongly in 2017, although risk retention will remain an unanswered question for CLOs through 2017. Strong underwriting and positive home price trends have positively impacted collateral for new and recently originated RMBS, Fitch concludes.

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