Alt-A Problems Grow, While Subprime Takes Turn for the Worse
Despite an absolute dearth of ARM resets, the number of severely delinquent Alt-A borrowers continues to grow, according to a report released late last week by Clayton Holdings, Inc. (CLAY). The number of troubled Alt-A borrowers in the 2007 vintage rose an eye-popping 26.5 percent from March to April alone, nearly reaching 17 percent of loan volume. The 2007 vintage isn't the only Alt-A vintage facing problems, of course: 19.3 percent of borrowers with loans originated in 2006 were more than 60 days delinquent at the end of April, a jump of nearly 10 percent from March. Cumulative losses percentages for 2006 vintage Alt-A first liens continued what Clayton analysts called a "concerning upward trend," with losses for 2006 issues running at more than three times the pace set by the 2004 and 2005 issues. The troubles in Alt-A are appearing despite the fact that very few borrowers in any vintage are yet to face a strong wave of rate-reset activity. The graph below shows that, if anything, lenders and policymakers should be concerned about a wave of pending Alt-A resets that are looming in the back half of 2009. http://www.clayton.com.