SEPTEMBER 17, 2014

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RMBS escapes serious losses from Northern California earthquake

by Reg Clodfelter

Last month, the northern San Francisco Bay Area was struck by a 6.0 magnitude earthquake — the largest earthquake to hit the Bay Area since the 6.9 magnitude Loma Prieta earthquake in 1989, according to the USGS — with damage estimates as high as $1 billion, with as much as half of that damage being residential, according to Eqecat, leaving many RMBS investors to wonder if their securities would be affected by a quake in California’s second-largest MSA. 

Now that enough time has passed to sift through the quake’s effects, Morningstar has found that there should be little impact on the cash flows of bonds, with no RMBS having a higher percentage of loans in the damage zone than the Sequoia 2012-02 transaction’s 2.73 percent.

Morningstar examined property-level data

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