Fitch Sees 60% of Current RMBS Borrowers Underwater

By DIANA GOLOBAY
October 13, 2009 1:48 PM CST

The majority — 60% — of remaining performing borrowers within ‘06- and ‘07-vintage residential mortgage-backed securities (RMBS) bear negative home equity, meaning they are underwater on their mortgages and owe more than their houses are worth.

This overwhelming presence of negative equity is hampering sustained improvement in RMBS performance, according to Fitch Ratings.

“[N]egative equity reduces a borrower’s inventive to pay their mortgage and limits their options when faced with financial difficulties,â€