'Serious Delinquencies' May Cause RMBS Downgrades
Moody's Investor Services announced Thursday it had revised its loss projections for residential mortgage-backed securities (RMBS) backed by prime jumbo loans. The vintage of RMBS in question was issued from 2005 to 2008; Moody's said it expects the 2005 vintage securitization to lose 1.7 percent, the 2006 vintage to lose 3.55 percent and the 2007 vintage to lose .505 percent. The 2008 securitization is projected to shed 6.2 percent. In light of the projections, Moody's said it has placed nearly 5,000 tranches of jumbo RMBS with an outstanding balance of $173.3 billion on review for various downgrades. About 70 percent of 2005 senior securities are expected to retain investment-grade ratings, while the rest likely will reach Ba or B ratings. Moody's said the majority of 2006 senior securities are likely to reach Baa1 to B3 ratings, while the majority of 2007 senior securities will likely migrate below B3. "[D]uring the last six months, jumbo mortgage loans backing 2005 to 2008 securitizations have shown substantial increases in serious delinquencies and decreases in prepayment rates -- levels that are unprecedented for this asset class," Moody's said. "...The quickly deteriorating performance, along with concerns about the continuing drop in housing prices nationwide and the rising unemployment rate has prompted" the revision. Log in to read details on Moody's revision. Continued housing market weakness, job loss and economic hardship is driving borrower delinquency elsewhere. A massive wave of recent foreclosures has led to various foreclosure halts, moratoriums and increased efforts for borrower workouts. With increased efforts by lenders and servicers -- now made mandatory for TARP fund recipients by President Barack Obama's "Making Home Affordable" plan, launched March 4 -- came an influx of homeowner hotlines to help navigate the confusing array of options. The Homeownership Preservation Foundation (HPF), which operates the Homeowner’s HOPE Hotline, announced Tuesday that on average, 13,500 homeowners have reached out to the Hotline each day since March 4, about three times the average number of daily calls the Hotline received prior to the release of the president’s program. The Treasury Department on Thursday announced another homeowner assistance portal designed to help borrowers attempting to attain a more affordable mortgage payment. MakingHomeAffordable.gov features self-assessment tools that will help borrowers to determine if they're eligible to participate and calculate the monthly mortgage payment reductions under the program. With these efforts in place, the volume of borrowers defaulting on payments is hoped to lessen somewhat in coming months. It's still unclear what effect, if any, the mortgage plan will ultimately have on the securitizations being considered for downgrades at Moody's. Write to Diana Golobay at email@example.com. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.