Posted on June 26th, 2008 in Daily Mortgage/Housing News - The Real Story, Daily Stock Market / Economic News - The Real Story
The numbers are staggering. Delinquencies among Alt-A first liens hit 21.22 percent in May, up 10.5 percent in a single month; 2007 fared even worse, with 60+ day delinquencies ratcheting up 22 percent to 18.55 percent.
On April 16th, I released a video highlighting the Alt-A space and its similarities to subprime entitled , ‘Look Out! Here Comes the Alt-A Crisis’, which you may want to watch in order to fill in any blanks and find where to get other important data.
In summary, Alt-A delinquencies and defaults are growing at an astounding pace. The highlights are as follows:
-60+ day delinquency percentages and roll rates increased in every vintage during May among Alt-A loans, while cure rates have declined only for 2003 and 2007 vintages.
– Alt-A is increasingly beginning to look a whole lot like subprime
– peak resets in the loan class aren’t expected until the middle of next year. In particular
– loss severity continues to ratchet upward — a trend that portends some likely further reassessment of rating models at each of the major credit rating agencies
– Loss severity reached 41.4 percent for all Alt-A first liens in REO during the most recent rolling six month period through May, Clayton said; that was up from a 37.6 percent rolling average one month earlier
– Loss severity compares to a similar 49 percent loss severity average for subprime first liens liquidated in REO through May.
– The latest Alt-A assumption of 35 percent loss severity on Alt-A loans, only one month old, already start to look a little too conservative
– The Ratings agency’s updated loss severity assumption was one key reason the agency cut ratings of 1,326 Alt-A residential mortgage-backed securities in late May — and put another 567 AAA-rated tranches on negative ratings watch
– 2006 vintage saw 60+ day borrower delinquencies among Alt-A first liens reached 21.22 percent in May, up 10.5 percent in a single month; 2007 fared even worse, with 60+ day delinquencies ratcheting up 22 percent to 18.55 percent
– Even the 2004 Alt-A vintage is defaulting at a fast pace: 60+ day delinquencies in the vintage shot up by nearly 24 percent in just one month
– The problem is rapidly falling home prices and a weakening economy are the chief culprits here.
– Out of all the active delinquent ARM loans in Clayton’s portfolio, approximately 70 percent were already delinquent prior to the first rate change date,” analysts at the firm noted in their report