Moody's Investors Service said today that it is likely to issue further downgrades to subprime RMBS transactions in the 2006 vintage, noting that the rating agency is continuing to see poor performance from underlying collateral that "will lead to downward ratings pressure on a number of US subprime and Alt-A tranches." From the press release:
... new data shows that 12-month collateral defaults for subprime RMBS issued in 2Q06 rose to 7.39%, more than three times the average of 2.00% for subprime RMBS issued between 1Q02 and 2Q05. In addition, among more recent vintages, six-month collateral defaults among 4Q06-vintage subprime RMBS reached 3.54%, nearly four times the average of 0.90% for subprime RMBS issued between 1Q02 and 2Q05. To date, Moody's has downgraded or placed on review for possible downgrade 496 first-lien, mortgage-backed securities issued in 2006 (3.04% of all Moody's-rated first-lien RMBS).
12-month default rates weren't available for analysis during the first and second quarter of this year, as many loans were just too new -- the fact that the 12 month default rate is showing a similar trend to the 6-month data suggests that performance will not be improving. This probably shouldn't come as a shock. What might shock you is something I've posted about a few times recently -- early returns on the 2007 vintage from the first half of this year appear as if they aren't much better than the numbers mentioned above. I'd noted in late August that the delinquency rate (not defaults) on the existing 2007 vintage in July stood at nearly 3 percent, based on the data I've been seeing. BTW, if you've got data to share or reports I should see, don't hesitate to email me.