KBRA Publishes Research: California Wildfires: An RMBS Impact Analysis

Business Wire

Ongoing California wildfires have been creating serious damage throughout parts of northern and southern California this month. While wildfires are not uncommon in these regions, the Woolsey and Camp fires, in particular, are notable not only for the amount of damage they have caused, but also the acreage impacted (246,949 total as of 11/18/18).

As Kroll Bond Rating Agency (KBRA) has done with previous disaster pieces, we are identifying the potential exposure in KBRA’s rated RMBS portfolio, in this case to the Woolsey and Camp wildfires. We include overall collateral concentrations by county in the zip codes which include areas where evacuation orders have been issued to date (whether those orders have been lifted or not). At this stage, KBRA notes the following:

While collateral concentrations in KBRA’s RMBS portfolio are higher in California (35.6%), we note that exposure, as measured by zip codes which include evacuation areas, is relatively limited as a percentage of KBRA’s rated portfolio.
While the California Core-Based Statistical Areas (CBSAs) covering Los Angeles-Long Beach-Anaheim, Oxnard-Thousand Oaks-Ventura, and Chico represent 11.20%, 0.76%, and 0.04%, respectively, of total pool balance within KBRA’s rated RMBS portfolio, the zip codes within these CBSAs where evacuation orders have existed represent a much smaller subset of KBRA’s portfolio.
Potential impact to evacuation areas include only 0.27% of the collateral from properties backing KBRA’s rated RMBS portfolio.
Due to the ongoing nature of these wildfires and the speculative nature of this exposure analysis, the true extent of damage is still unknown.
Unlike flood insurance, which is only required for borrowers in flood zones, all borrowers are required to have hazard insurance, which typically covers fire damage, including wildfires.
Representation & Warranties (R&Ws) in RMBS typically cover the presence of hazard insurance and damage to the property occurring prior to the securitization closing date.

In the publication, KBRA provides a full list of estimated exposures in California by current balance for every KBRA rated PLS transaction and original balance for every KBRA rated CRT transaction.

To access the report, click here.

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About KBRA and KBRA Europe

KBRA is a full service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus, is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.