High Risk Delinquency Rates Turn the Corner

Written by: Steve Cook   Mon, June 7, 2010 Beyond Today's News, Foreclosure Situation


The worst looks to be over for the high risk loans that ignited the housing depression.  Alt-A delinquencies declined for the second consecutive month following a steady four-year increase and subprime delinquencies also fell for the third straight month, according to the latest performance metrics from Fitch Ratings.

Alt-A RMBS delinquencies decreased to 33.9 percent in May from 34.1 percent in April (up from 28.3 percent in May 2009), representing the second month-over-month decline since April 2006. California and Florida hold more than 50 percent of the volume of Alt-A RMBS loans outstanding. While Florida delinquencies remained unchanged at 51.7 percent, California delinquencies fell to 35.5 percent from 35.8 percent the prior month. After falling sharply in April, roll rates rose to 3.1 percent in May from 2.6 percent. Prior to last month’s improvement, roll rates had not been below 3 percent since June 2008.

Subprime RMBS delinquencies fell again in May, down to 44.8 percent from 45.2 percent the prior month. They remain above the 40.7 percent rate of a year ago. The roll rate for May rose to 4.3 percent from 3.9 percent the prior month and but remained well below the trailing 12-month average of 5.4 percent.

The improvements in delinquency rates were tempered by the bounce back in roll rates. ‘A sustainable decline in delinquencies is difficult to achieve without an accompanying decline in roll rates,’ said Managing Director Vincent Barberio. Additionally, ‘The short-term beneficial effect of tax refunds may have run its course.’

Fitch’s RMBS Performance Metrics combines loan level data from Fitch Ratings and LoanPerformance to include delinquency trends, roll rate movement and loss rates across vintage, sector, and mortgage type. The report also includes data on mortgage servicing trends, such as modification activity and advancing percentages, as well as a summary of bond rating changes.

1 Comments For This Post

  1. Jim McCormack Says:

    It is only going to get worse. Foreclosures and short sales will continue to either increase, or remain very high for the next 3-5 years. That coupled with 7%+ unemployment even after the economy recovers will keep mortgage loan delinquencies at elevated levels even longer. It will then take the real estate market 5+ years to gain back some of the ground lost. I predict that by the time all the declining is finished, real estate values will not get back to peak 2005-2006 levels until around 2025-2030.

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