Default Rates on Structured Finance Securities

Abstract

In this article, the authors attempt to determine historical default rates for structured finance assets: asset-backed securities, commercial mortgage-backed securities, and residential mortgage-backed securities. They focus on triple B rated residential B&C tranches that make up a great percentage of the collateral in many structured finance-backed collateralized debt obligations. They examine six recent rating agency studies and delve into their methodologies before arriving at their own estimates of historic structured finance defaults.