Fitch: Alt-A RMBS Delinquencies Fall For First Time Since 2006

Posted by Orb Staff on May 11, 2010 No Comments
Categories : Mortgage Servicing

Serious delinquencies for Alt-A residential mortgage-backed securities (RMBS) declined for the first time in four years in April, according to the latest Performance Metrics results from Fitch Ratings. Subprime late-pays also fell for the second straight month, while prime RMBS delinquencies increased slightly.

Higher cure rates and an increased volume of loan modifications, along with improvements in both liquidation and roll rates, all contributed to the turnaround in both subprime and Alt-A delinquencies, Fitch says

‘Last month's improvements may be a signal that RMBS performance is beginning to the turn the corner,’ says Vincent Barberio, a managing director at the company. ‘The next few months will be a better indicator of whether we're witnessing the beginnings of a legitimate turnaround or a short-term seasonal effect of tax refunds.’

Despite the change in performance, Fitch cautions that approximately 8% of current Alt-A loans and 35% of current subprime loans are modified and have a substantial risk of redefault.

Alt-A RMBS delinquencies decreased to 34.1% in April from 34.4% in March (up from 27.4% in April 2009), representing the first month-over-month decline since April 2006.

California and Florida hold more than 50% of the volume of Alt-A RMBS loans outstanding. While the delinquencies for these loans in Florida remained unchanged at 51.7%, delinquencies in California fell to 35.8% from 36.3% the prior month. Roll rates also improved, falling to 2.6% from 3.9% last month.

Subprime RMBS delinquencies fell to 45.2% in April from 46.3% in March, and they remain above the 40.1% rate of a year ago. The roll rate for April fell to 3.9% from 4.5% the prior month and was well below the trailing 12-month average of 5.5%, Fitch says.

Prime jumbo RMBS 60+ days delinquencies, meanwhile, rose from 10.1% in March to 10.2% in April. A year earlier, the prime jumbo delinquency rate was at 5.4%. After nearly tripling in 2009, delinquencies are up another 98 basis points (bps) since the beginning of the year. However, April roll rates fell below 1% after rising in the prior month to 1.4% – their highest-ever level in Fitch's Performance Metrics history.

California prime jumbo loan performance weakened slightly in April, with 60+ days delinquencies rising to 11.9% from 11.8% in March (and 6.1% in April 2009). During the first four months of the year, Florida had the biggest jump (1.8%) of the five states with the highest volume of jumbo loans outstanding. New Jersey was second of the five states, with a 1.3% increase over the same period.

Combined, the five states with the highest volume of prime RMBS loans outstanding – California, New York, Florida, Virginia, and New Jersey – represent approximately two-thirds of the total sector.

Prime jumbo RMBS 60+ day delinquencies for these states in April as compared to March, and their approximate share of the estimated $364 billion market, are as follows:

  • California: 11.9%; up from 11.8% (44% share of the market);
  • New York: 6.7%; the same as the prior month (7% share);
  • Florida: 17.8%; up from 17.5% (6% share);
  • Virginia: 5.6%; down from 5.8% (5% share); and
  • New Jersey: 8.4%; up from 8.2% (3% share).

SOURCE: Fitch Ratings

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