In Battered Secondary Mortgage Market, Some Encouraging Trends May Be Emerging

The secondary mortgage market, particularly on the private-party side of the fence, has just been ravaged by the ongoing housing and credit crisis. Private-party MBS issuance literally vanished during the first quarter, with just $7.7 billion in mortgages securitized by private conduits in Q1 2008. The market likely won’t be coming back any time soon, but some encouraging trends are beginning to emerge in existing subprime and Alt-A deals, according to a report released this week by mortgage information and analytics firm Clayton Holdings, Inc. (CLAY). Although delinquencies continued to rise during March across both credit categories and key vintages, roll rates actually declined and cure rates leveled. For those that aren’t familiar, roll rates refer to the percentage of troubled mortgages that move from one delinquency state to another (i.e., 30-day DQs to 60-day DQs); decreasing roll rates, therefore, mean that fewer borrowers transitioned down the default pipeline during March. Cure rates refer to the percentage of troubled loans that were successfully worked out, or cured. Subprime roll rates declined across all vintages tracked — 2002 through 2007 — while cure rates decreased slightly across all but the 2002 vintage, Clayton said. For Alt-A, in all but the 2005 vintage, first lien roll rates are down between one and three percent month over month, while first lien cure rates rose in all but the 2005 vintage during March. The report’s data shows that servicers may actually be making headway in the fight against foreclosures, despite strong accusations to the contrary from consumer groups and related agencies. The March results “could indicate an upswing in deal performance or that lender-based workout programs are helping borrowers get current,” according to the report. And the potentially encouraging signs don’t end with roll rates and cures, either. Clayton also noted that the one-month CPR (conditional prepayment rate) reversed course in March, and leveled or increased across all subprime and Alt-A vintages after nearly a year of steady decline. For more information, visit

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