Global Economic Slowdown may Lead to Drop in Supply of Loans in Developing Countries: Fitch
Azerbaijan, Baku, 6 October/ Trend , corr I. Khalilova/ The level of defaults on mortgage loans granted in developing countries of Europe, Near East and Africa must be estimated for each creditor separately as relatively shorter historical period of time which included data and absence of market standardization makes it complicated to accept assumption on probable defaults all over the country, report by Fitch Ratings said.
Fitch can not make general country assumptions on defaults for states with developing economies on the basis of date provided by the small number of creditors and national organizations (including central banks or association of creditors) from developing markets.
"Therefore, rating agency thinks that assessment of probability of default in mortgage lending in developing countries must be based on data provided by creditors preferably on each credit," said Nicolas Arduan, junior director of Fitch analytical group for housing mortgage securities.
Analysis of historical figures is an important element of rating process and from standpoint of current global economic slowdown which can lead to drop in supply of loans and in housing prices in a number of countries with developing economies as in case of Kazakhstan. (At present, rate of crediting is slowing down in Azerbaijan and many banks suspended mortgage and consumer loans from September).
The report indicates stage-by-stage approach of Fitch to awarding ratings to securitization deals from developing markets. The collection and providing data are reviewed and the way economic volatility in these countries is taken into consideration in the analysis is explained. The report indicates sovereign ratings, rating of country limit and macroeconomic situation of a relevant state are taken into consideration in a rating of deals on mortgage securitization in developing markets.
The report puts special emphasis on the approach of the agency to currency risks on deals where loans in foreign currencies act as a backing and impact of seesaws in exchange rates on capability of borrowers to serve their mortgage loans.
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