The raters have had a field day on Alt-A and Jumbo Prime RMBS over the past few months, even though they are always late to the party. Our data and research have been showing Subprime defaults wane and Alt-A, Jumbo Prime and Prime defaults surge for many months now, but at least they are beginning to get the real story out there.
Please see my most recent story on Jumbo Prime:
- Jumbo Prime: ‘Walk Away’ Loans – More Downgrades Coming
Posted on December 10, 2008 6:51 AM
As a matter of fact 60 Minutes ran a story last night about Alt-A and Pay Option ARMs that seemed as though someone over there has been reading this blog. Both of these should be indicators to you that the Alt-A and Jumbo Prime Implosions are in full effect as I type. To add to this, the government is throwing everything it can at mortgage and housing, including trash mortgage modifications offering teaser rates, negative amortization and 40-year terms. This should be a fairly good indication that conditions are much worse than what is being reported.
Remember, this problem is very linear… from Subprime to Alt-A to Jumbo Prime to Prime with negative equity and resets being leading indicators to default and foreclosure. HELOCs blow up throughout the entire chain, as they were used with all loan types in order to achieve the most amount of leverage possible. Think of these as four different ball games going on simultaneously. Subprime is in the 7th inning, Alt-A in the bottom of the 3rd, Jumbo Prime in the 2nd, Prime conventional in the 1st and HELOCs a sideshow playing at all of the games. Overall, my best guess is that the mortgage implosion is somewhere in the 3rd inning if left to run its course naturally.
Below are a couple of recent stories that show how quickly this is going bad. The losses are extreme but roughly in-line with what we are seeing for whole loans in foreclosure on the balance sheets of Wells Fargo, Bank of America, Chase, Citi and Wachovia. -Best, Mr Mortgage
- A rapid deterioration of U.S. Alt-A RMBS performance in recent months has effectively entrenched the sector in a severe stress scenario, according to Fitch Ratings.
- The expected losses used in Fitch’s updated methodology are significantly higher than Fitch’s previous ‘moderate stress’ scenario used to drive the rating actions taken earlier this year.
- One major driver of the increased loss expectations is the rapid increase in 60+ day delinquencies experienced over the past six months.
- Between May and October 2008, 60+ day delinquencies for the 2007 vintage increased from 8.80% to 14.65%.
- The 2006 and 2005 vintages also experienced steep increases rising from 10.30% to 14.24% and 6.57% to 8.79%, respectively.
- The small increase in cumulative losses relative to the rising level of 60+ day delinquencies reflects, in part, the lengthening foreclosure/liquidation timeline being experienced throughout all vintages.
- Projected average frequency of foreclosure (FOF) for the remaining balance of the 2005, 2006 and 2007 mortgage pools is 9.9%, 18.4% and 21% respectively.
- The average loss severity (LS) expectations are 42.4% for 2005, 46.7% for 2006, and 49.4% for 2007.
- Fitch is currently reviewing its rated Alt-A transactions and will be releasing updated ratings over the next several days. Due to increased loss expectations, particularly for the 2006 and 2007 vintages, Fitch will downgrade many senior bonds to below investment grade.
- Fitch’s new ‘U.S. RMBS Alt-A Surveillance Criteria’, dated Dec. 15, 2008 can be found at ‘www.fitchratings.com’ under the following headers:
Structured Finance >> RMBS >> Criteria Reports Contact: Vincent Barberio +1-212-908-0505 or Grant Bailey +1-212-908-0544, New York. Media Relations: Sandro Scenga, New York, Tel: +1 212-908-0278, Email: email@example.com.
JUMBO STORM by MortgageDaily.com
Tranches of the following jumbo residential mortgage-backed securities issued in 2006 and 2007 were impacted by Moody’s actions.
- 264 classes from 13 J.P. Morgan transactions;
- 209 certificates from 16 RFMSI transactions;
- 188 tranches from seven RMBS issued by GSR;
- 77 classes from 15 Wells Fargo Mortgage Backed Securities Trust securitizations;
- 60 certificates from MASTR Asset Securitization Trust 2006-1 and 2006-2;
- 50 tranches from 10 Thornburg transactions;
- 31 certificates from four Citigroup deals;
- 24 classes from five Citicorp securitizations;
- 22 tranches from 12 Banc of America transactions;
- 22 classes of Sequoia Mortgage Trust 2007-2, 2007-3 and 2007-4;
- 21 certificates from five First Horizon Mortgage deals;
- 21 classes from J.P. Morgan Mortgage Trust 2006-A4;
- 17 tranches from Bear Stearns ARM Trust 2006-1, 2007-2 and 2007-4;
- 15 classes of Merrill Lynch Mortgage Backed Securities Trust 2007-2, 2006-F1 and 2006-1;
- 15 certificates from Prime Mortgage Trust 2006-2 and 2007-1; and
- eight classes from GMACM Mortgage Loan Trust 2006-AR1.
But 2006 and 2007 weren’t the only jumbo vintages impacted by recent ratings actions. Standard & Poor’s Ratings Services reported that it lowered ratings on hundreds of classes of jumbo transactions issued from 2002 through 2007. Classes from the following RMBS were impacted by S&P’s actions:
- Bank of America Mortgage 2002-E Trust;
- Bear Stearns ARM Trust 2007-4;
- Chase Mortgage Finance Trust Series 2007-A2;
- CHL Mortgage Pass-Through Trust 2007-2, 2007-3 and 2007-4;
- Citigroup Mortgage Loan Trust 2007-AR4;
- CSMC Mortgage-Backed Trust 2007-1 and 2007-2;
- First Horizon Mortgage Pass-Through Trust 2002-AR2 and 2003-AR1;
- GSR Mortgage Loan Trust 2007-4F and 2007-AR1;
- JPMorgan Mortgage Trust 2007-A3;
- Lehman Mortgage Trust 2007-3 and 2007-5;
- Merrill Lynch Mortgage Investors Trust MLCC 2007-2;
- RFMSI Series 2007-S1 Trust, 2007-S3 Trust, 2007-S4 Trust, 2007-S5 Trust, 2007-SA1 Trust and 2007-SA2 Trust;
- STARM Mortgage Loan Trust 2007-2 and 2007-3;
- Structured Asset Mortgage Investments II Trust 2004-AR5; and
- WaMu Mortgage Pass-Through Certificates Series 2007-HY4 Trust.
More Related Mr Mortgage Stories
- Moody’s Ominous Alt-A Warning – Mortgage Implosion Round 2 (22)
Posted on November 18, 2008 1:20 AM
- S&P Doing the Nasty on $280 Billion in Alt-A…Largest Ever (33)
Posted on October 15, 2008 10:07 PM
- Moody’s & Fitch Join S&P in Massive Alt-A RMBS Downgrade Avalanche (31)
Posted on August 4, 2008 7:56 PM
- S&P Does Hatchet Job on Thousands of Prime, Alt-A and Subprime RMBS (28)
- Posted on July 30, 2008 3:15 PM