Fitch has released its Global 2008 RMBS Transition and Default Study and 2009 Performance Outlook. In its comment, Fitch focuses our attention in a backdoor sort of way on the troubles in the US (we added the emphasis):

“The outlook for the global residential market and RMBS ratings remains negative in 2009 as loan defaults are expected to increase while prepayments will slow considerably. Downgrades will continue to significantly outweigh upgrades in 2009 across all rating categories. However, Fitch Ratings anticipates that, other than the U.S, the majority of rating actions for RMBS will be confined to lower rated tranches and that highly rated ‘AAA’/'AA’ tranches will be able to weather the current downturn.”

The implication of course is that even the ‘AAA’ rated RMBS’s in the US banks will be downgraded significantly over 2009. The residential mortgage and housing price implosion in the US is only half to two thirds done.

“In 2009, residential markets across the US will continue to decline and cause further pressure on ratings. For the subprime and Alt‐A sectors, downgrades have been extensive and further downgrades may not be as widespread as in previous years, thus the Rating Outlook is Stable to Negative. For prime, where downgrades to date have been less prevalent, especially at the senior level, the Rating Outlook is Negative reflecting the poor housing market and wider economy.”

Paul Jackson at Housingwire.com reports:

On the heels of the Treasury’s latest plan to work with private investors to purchase private-party RMBS, Fitch Ratings said Monday afternoon that it had revised its projected cumulative loss estimates for 2005-2007 vintage U.S. prime RMBS transactions — in other words, more downgrades are coming.

Why defaults are surging among prime borrowers has less to do with the mortgage instrument, as was the case early in the mortgage crisis, than with more traditional risk factors tied to declining property values and rising unemployment. For example, Fitch said it found that loans with multiple risk attributes such as limited income documentation and second-liens, are defaulting at rates approximately three times that of loans without those characteristics.

Negative equity, too, is a still-emerging problem: borrowers with negative equity in some recent vintage mortgage pools are approaching 50 percent, the rating agency said. Borrowers with no remaining equity are defaulting at a rate three times greater than their equity-holding counterparts.

Continuing deterioration in what used to be prime credit means the assets Giethner’s plan is aimed at removing from banks are growing faster than PIMCO  can say, “We intend to participate and do our part to serve clients as well as promote economic recovery”.