Rising Roll Rate Offsets Declining Non-Agency Loan Delinquencies

by devteam June 8th, 2010 | Share

Datarnreleased by Fitch Ratings on Monday show the same trend as other recentrndelinquency surveys:  the worst appearsrnto be over for subprime and Alt-A loans while delinquencies in the jumbo primernmortgage sector are continuing to increase.</p

According to Fitch's Performance Metrics for May, delinquencies in Alt-A ResidentialrnMortgage Backed Securities (RMBS) declined for the second straight month andrnsubprime delinquencies fell for the third month in a row.  Prime RMBS backed delinquencies, howeverrnincreased slightly.</p

Offsettingrnthe good news, however, was a continued increase in roll rates, the number ofrnloans moving from one delinquency bucket to a later bucket rather than curingrnand returning to “current” status. rnAccording to Fitch Ratings Managing Director Vincent Barberio, “Arnsustainable decline in delinquencies is difficult to achieve without anrnaccompanying decline in roll rates.” rnBarberio said that the good news was further tempered by indicationsrnthat “the short-term beneficial effect of tax refunds may have run itsrncourse.”</p

Alt-ArnRMBS delinquencies dropped to 33.9 percent in May from 34.1 percent in Aprilrnbut were still higher than the 28.3 percent rate recorded in May 2009.  Roll rates for Alt-A loans increased to 3.1rnpercent in May from 2.6 percent a month earlier.  The April rate had marked a sharp decline andrnthe first time roll rate for Alt-A loans had dropped below 3 percent sincernJune 2008.</p

Sub-primerndelinquencies dropped from 45.2 percent in April to 44.8 percent in May but thernroll rate rose month-over-month from 3.9 percent to 4.3 percent.  This was still well below the trailingrn12-month average of 5.4 percent.  Subprimerndelinquencies one year ago were 40.7 percent. </p

Despite the improvementrnin delinquencies rates, Fitch cautions that approximately 9% of performingrnAlt-A loans and 37% of performing subprime loans are modified and carry arnsubstantial risk of re-default. </p

Prime jumbornRMBS 60+ day delinquencies rose to 10.3% for May compared to 10.2% for Aprilrnand 5.9% in May 2009. After nearly tripling in 2009, delinquencies are uprnanother 1.1% since the beginning of the year. May roll rates rose above 1%rnafter dipping below that level in the prior month but remained below theirrnhighest-ever level (1.4%) in Performance Metrics history, which was recorded inrnMarch. Fitch did not give percentages for delinquencies, past or present, forrnconforming prime loans.</p

California andrnFlorida continue to drive the numbers, holding more than 50% of total of Alt-ArnRMBS loans outstanding. While Florida delinquencies remained unchanged atrn51.7%, California delinquencies fell to 35.5% from 35.8% the prior month.</p

In California thernprime jumbo loan performance weakened slightly in May, with 60+ daysrndelinquencies rising to 12% from 11.9% in April (and 6.8% in May 2009). Duringrnthe first five months of 2010, Florida had the biggest jump (2%) of the fivernstates with the highest volume of jumbo loans outstanding. New Jersey wasrnsecond of the five states with a 1.4% increase over the same period. </p

The five states withrnthe highest volume of prime RMBS loans outstanding (California, New York,rnFlorida, Virginia, and New Jersey) combined represent approximately two-thirdsrnof the total $358 billion sector.  Fitchrngives the prime jumbo RMBS 60+ day delinquencies for these states as of Aprilrn2010 compared to the prior month, and their approximate share of the estimatedrn$358 billion market, as follows:</p<ul

  • California:rn12%; up from 11.9% (44% share of the market)</li
  • New York: 7%;rnup from 6.8% (7% share)</li
  • Florida: 18%;rnup from 17.8% (6% share)</li
  • Virginia:rn5.6%; the same as the prior month (5% share);</li
  • New Jersey:rn8.5%; up from 8.4% (3% share). </li</ul

    Fitch's RMBSrnPerformance Metrics are updated monthly and combine loan level data from FitchrnRatings and LoanPerformance to include delinquency trends, roll rate movementrnand loss rates across vintage, sector, and mortgage type.

    All Content Copyright © 2003 – 2009 Brown House Media, Inc. All Rights Reserved.nReproduction in any form without permission of is prohibited.

  • About the Author


    Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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