Tuesday, January 5, 2010

Jumbo Loan Default Rate Moving on Up

Standard and Poor's released their report on various RMBS(jumbo mortage loan pools), we read the report and wanted to highlight a few of the more interesting points related to jumbo loans.

The percentage of delinquent prime jumbo RMBS transactions issued in 2004 climbed to 7.97% in November, up from 7.8% in October. Delinquencies in the 2005 vintage increased to 10.65% in November from 10.2%. For the 2006 vintage, delinquencies grew to 15.25% from 14.67%, and for the 2007 vintage, delinquencies increased to 14.74% in November from 14.24%, according to the report

Unfortunately, for the banks(read:US GOV) and investors that bought these loan vintages things are not ageing well at all. Reminds me of the bidder who bought decades old Rothschild wine only to have purchased the world's most expensive vinegar. Book was "The Billionaire's Vinegar"

Now who are the crazy lenders/banks that did these loans. Surely, it was those pesky subprime guys. Not at all my friend:
The 2007 vintage showed notably worse deterioration after 24 months of “seasoning,” according to the report. After the 24 months, delinquencies totaled 10.65% of the current aggregate pool balance compared to 2005’s 1.53% and 2006’s 4.57% delinquency rate after the same amount of seasoning. But 2006 showed a poorer performance than its prior vintages. After 36 months of seasoning, delinquencies accounted for 11.2% of the current aggregate pool balance, a 185% increase over the 2005 vintage.
Delinquencies and losses varied among the issuers and securitizers of prime jumbo RMBS transactions. For the 2005 vintage, the percentage of delinquent transactions reached 18.68% for Countrywide, the most among issuers. For 2006, the leader was Washington Mutual’s 22.2%, and for 2007, Bear Stearns’ 20.25% led all issuers.
Remember the overall delinquency rate for jumbo mortgages of all vintages is running about 12%. Meaning at least 12% of loans are at least 60 days late. Realtors.... start calling the REO department of BOA, CHASE, etc as they now hold these loans that are surely to be nice foreclosure listings/deals in 6-9 months.

If you are so inclined to read the wonkish research of S&P it can be found here.

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