From a HousingWire via a plugged-in tipster:
Severe delinquencies on recent-vintage Alt-A RMBS are quickly getting worse than expected, Moody’s Investors Service said earlier this week; the rating agency said worsening trends in Alt-A have forced it to undertake a revision of lifetime loss projections for 2006 and 2007 vintages, as a result. Moody’s last revised its loss expectations for the Alt-A sector six months ago.
As of Oct. 2008, serious delinquencies for Alt-A pools — including option ARMs — averaged 20.3 percent of current balance for the 2006 vintage and 17.5 percent for the 2007 vintage, up from 16.9 and 12.2 percent six months ago. At the same time, prepayment rates on these pools are at historical lows and are currently averaging in the mid to high single digits, Moody’s noted. Serious delinquencies refers to mortgages more than 60 days in arrears, in this case.
(In plain English, and keeping things simple: the prepayment picture here is important. Delinquencies as a percentage of current balance can go up as a matter of course as a loan pool seasons and borrowers prepay, and revintage, themselves. By stressing here that prepayments aren’t just low, but really low, Moody’s is saying that this statistical artifact is not driving the rise.)
While cumulative losses have not yet risen as steeply as delinquencies, many pools are starting to show a sharp increase in the rate of loss realization, according to Moody’s. And as the pace of liquidations has picked up, the performance data suggests worsening loss severities, as well.
∙ Alt-A Losses Outstripping Expectations, Moody’s Says [HousingWire]
∙ Subprime And Alt-A Statistics By County: The Feds Mortgage Map [SocketSite]
Hoocoudanood?
San Francisco is becoming more and more toxic to Alt-A specuvestors. Sales are lower, prices are going down and rents do not cover the holding costs by far.
Coming FronziScheme’s points with a worsening economy and the lack of refinancibility and you have almost the perfect storm. The crash of Alt-A loans is only going to cause a vicious cycle of more crashing too.
Severe delinquencies on recent-vintage Alt-A RMBS are quickly getting worse than expected
who are they kidding? anybody who understands finance and isn’t trying to hide the problem has been expecting this for some time, the second phase of the mortgage crisis.
the problem with Alt A is that the loans tend to be so darn large, so you don’t need a huge default rate to quickly get huge losses.
The 2006-2007 vintage of Alt A loans have performed horricially since inception, and have consistently “surprised” the idiot ratings agencies.
they are only surprised because they’re paid to be surprised.
there is one factoid missing from this analysis however;
one of the reasons that the delinquencies are so high and the prepayments are so low is because current borrowers can’t qualify for a refinancing… this is one area that the govt can change if they choose. (with lots of taxpayer money).
if the govt does step in, you could see rapid prepayments and the delinquency rate go down.
editor – the post (responding to a post by irrational exuberancethat was moved) should be moved to the deflation thread as well. I guess this post will self-destruct shortly!
[Editor’s Note: Both comments have in fact been moved to here. We’re going to try and keep this discussion focused on Alt-A.]
As more Alt-A loans go bad REO sales will lower values and I predict that we will see a lot of people that don’t need to sell putting homes on the market since it does not make sense to pay $12K a month to “own” a home when you can rent one in the same area for much less (as LMRiM has pointed out) and not worry about the value dropping below your loan amount when your wife decides that “it has been fun living in SF since grad school, but now that you have kids she wants to move back near her family in the Boston area”…
http://calculatedrisk.blogspot.com/2008/11/kedrosky-option-arm-non-bomb.html
Food for thought.
Dave, I wonder if data exists (in accessible form) indicating what percentage of resetting ARMs in SF fall into each category: LIBOR, COFI or treasuries? Do these vary across different market segments in some predictable fashion?