BarCap estimates more subprime defaults from troubled vintages
BarCap analysts are predicting high default rates on still-current subprime mortgages originated between 2005 and 2007. Of those subprime mortgages still current and originated in 2005, 70% are expected to default. In 2006, the expected default rate for current subprime is 89%, and 84% of current subprime from the 2007 vintage. According to data provided to HousingWire by CoreLogic, there were 4.4 million subprime loans originated between 2005 and 2007. There were more than 2.2 million in 2005, 1.7 million in 2006 and just over 338,000 in 2007. Of those, 1.7 million are still active loans somewhere in the process of the loss mitigation pipeline. According to CoreLogic, 795,000 of subprime originated in those years are current. Because CoreLogic is a data analytics firm providing current loan-level information and BarCap is an investment bank, a correlation between the two sets of data is not possible, considering the differing motivations of the two firms. But the CoreLogic data does give some context around how many loans BarCap is referring to. James Olecki, a spokesman for Ally Financial, formerly GMAC, said its mortgage financing arm Residential Capital (ResCap) uses its own models to target its collection efforts. "Based on these models, we adjust our staffing levels to meet demand. While we believe we are adequately staffed to serve the current delinquency market, we will monitor these trends closely," Olecki said. Scott Brinkley, senior vice president of outsourcing and technology solutions at CoreLogic said this high percentage of delinquency will continue to put a strain on the lenders. "When you look at these volumes, most of the loss mitigation activity is coming to a head," Brinkley said. Brinkley said initiatives such as the Home Affordable Modification Program (HAMP) and government-sponsored enterprise (GSE) servicing guidance has added a year to the loss-mit pipeline. "Within the next 12-18 months," Brinkley said, "you're going to see most of these old vintages work through the loss-mit arena, whether it's a refinance or a forbearance and that trickles on into foreclosure or bankruptcy and into REO." Write to Jon Prior.