OREANDA-NEWS. The outlook for U.S. structured finance is stable to positive overall next year, though certain subsectors bear watching for signs of trouble, according to Fitch Ratings in its 2016 outlook report.

Most of Fitch's of Rating Outlooks (over 87%) remain Stable or Positive heading into next year. 'The collateral quality is still excellent, performance metrics solid and structural protections robust,' said Managing Director Kevin Duignan. 'That said, it's probably safe to assume that structured finance has seen its best days, with underwriting likely to loosen further in some sectors.'

The macro outlook, while still strong, has dampened somewhat. Overall growth expectations are receding with the prospect of higher rates threatening to dampen broader gains. Long awaited Fed tightening will impact all sectors albeit to varying degrees, with CMBS (Rating Outlook Stable) most likely to feel the effects as refinancing needs loom. This along with continued declines in underwriting is two of the aforementioned warning signs that could surface for CMBS in 2016.

Amid the generally Stable Outlook for most ABS sectors, a notable outlier of concern remains FFELP student loan ABS, the Rating Outlook of which has turned Negative given widespread maturity risk issues plaguing the sector. Continued looser underwriting is another possible warning sign for both prime and subprime auto ABS (Stable Outlook), with performance continuing to slowly revert back toward historical norms.

As for CLOs, the warning signs are likely to manifest in the form of slowly increasing loan defaults (particularly among energy and metals/mining companies). That said, any ripple effect for the structures should be marginal and not affect the Stable Outlook for the sector next year.

Meanwhile, RMBS (Rating Outlook Stable) continues its slow and steady recovery from the financial crisis. New deal volume was the highest on record last year post-crisis, though still a small fraction of pre-crisis volume levels. Strong home price gains will continue to boost performance for legacy RMBS while performance on post-crisis RMBS loans remains the best in the history of the sector.