How Credit Distress Due To COVID-19 Could Affect Irish Reperforming RMBS

As Ireland’s policy response to the COVID-19 pandemic has centered on public health, S&P forecast’s that the country will face a contraction in GDP as well as increased unemployment and stress in Irish residential mortgage-backed securities.  The European Banking Authority’s deadline for payment holiday applications was June 30. It is expected that the European Banking Authorities payment holiday program will cause liquidity constraints at a pool level. While the remediation of these payment holidays will likely involve repayment of the additional accrued amount, distributed over the remaining outstanding term, or a term extension to enable borrowers to continue repaying in full. it’s unclear the impact these measures will have on mitigating borrower distress and how they will prevent delinquencies or defaults.