Fitch: Prime Jumbo RMBS Delinquencies Approach 10%

U.S. prime jumbo loan performance continued to weaken in January as serious delinquencies rose for the 32nd consecutive month, according to Fitch Ratings.

‘The new year has brought no relief from declining jumbo loan performance,’ says Fitch managing director Vincent Barberio. ‘The trend line for delinquencies indicates the 10 percent level could be reached as early as next month.’

Although prime jumbo loan delinquencies began to rise in the second quarter of 2007, they accelerated in 2009, nearly tripling over the course of the year. Florida saw the biggest monthly jump of the five states with the highest volume of jumbo loans outstanding.

Overall, prime jumbo residential mortgage-backed securities (RMBS) 60+ days delinquent rose to 9.6% for January (up from 9.2% for December 2009). While delinquency rates on earlier vintages (pre-2005) remain well below that of recent vintages, more seasoned pools have experienced significant deterioration over the past year, with 60+ days delinquencies increasing from 1.8% to 4.3%, Fitch says.

While less than 5% of prime jumbo senior RMBS classes issued prior to 2005 have been downgraded to date, approximately 40% currently have a Negative Rating Outlook as a result of the weakening collateral performance.

The five states with the highest volume of prime jumbo loans outstanding (California, New York, Florida, Virginia and New Jersey) comprise approximately two-thirds of the loans in question. Prime jumbo RMBS 60+ day delinquencies for these states in January 2010 compared to December 2009, and their approximate share of the $381 billion market, are as follows:

  • California: 11.3%, up from 10.8% (44% share of the market);
  • New York: 6.1%, up from 5.8% (7% share);
  • Florida: 16.6%, up from 16% (6% share);
  • Virginia: 5.6%, up from 5.4% (5% share); and
  • New Jersey: 7.4%, up from 7.1% (4% share).

Prime jumbo borrowers that were current on their mortgage the previous month but missed a payment the following month (the roll rate) fell slightly to 1.2% for January from the seasonal high of 1.3% in December 2009, but remained above the 1% monthly average for 2009. Of the three major RMBS sectors (prime, Alt-A, subprime), prime is the only sector currently experiencing roll-rates higher than one year ago.

SOURCE: Fitch Ratings


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