Prime Jumbo RMBS Delinquencies Climb in November: S&P

Delinquencies increased for US prime jumbo residential mortgage-backed securities (RMBS) in November across all vintages, according to a report from Standard & Poor’s rating service. The percentage of delinquent prime jumbo RMBS transactions issued in 2004 climbed to 7.97% in November, up from 7.8% in October. Delinquencies in the 2005 vintage increased to 10.65% in November from 10.2%. For the 2006 vintage, delinquencies grew to 15.25% from 14.67%, and for the 2007 vintage, delinquencies increased to 14.74% in November from 14.24%, according to the report. S&P measures the delinquencies as percentages of the current balance. A jumbo mortgage has a loan amount above the $417,000 conventional loan limit set by Fannie Mae (FNM) and Freddie Mac (FRE). In higher-priced markets the limit is $729,750, and, in October, appropriations committees in both the House and Senate proposed an extension of the limit through 2010. On a three-month average, the delinquency rate slowed in November. The three-month average rate of delinquency growth reached 4.33% for the 2004 vintage, 5.16% for the 2005 vintage, 5.07% for the 2006 vintage and 5.55% for 2007. The original pool balances continue to rise with delinquencies, an indicator that the performance for these transactions worsens over time. The numbers also show that deteriorating loans no longer solely plague the subprime pools. The 2007 vintage showed notably worse deterioration after 24 months of “seasoning,” according to the report. After the 24 months, delinquencies totaled 10.65% of the current aggregate pool balance compared to 2005’s 1.53% and 2006’s 4.57% delinquency rate after the same amount of seasoning. But 2006 showed a poorer performance than its prior vintages. After 36 months of seasoning, delinquencies accounted for 11.2% of the current aggregate pool balance, a 185% increase over the 2005 vintage. Delinquencies and losses varied among the issuers and securitizers of prime jumbo RMBS transactions. For the 2005 vintage, the percentage of delinquent transactions reached 18.68% for Countrywide, the most among issuers. For 2006, the leader was Washington Mutual’s 22.2%, and for 2007, Bear Stearns’ 20.25% led all issuers. Write to Jon Prior. Disclosure: the author holds no relevant investments.

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