Subprime, Alt-A Delinquencies Drop

uency declines continued for both U.S. Alt-A and subprime residential mortgage-backed securities (RMBS) last month, according to the latest Performance Metrics results from Fitch Ratings. Alt-A RMBS declined for the second consecutive month, following a steady four-year increase. Subprime late-pays also fell for the third straight month, while prime RMBS delinquencies increased slightly. However, the improvements in delinquency rates were tempered by the bounce back in roll rates. ‘A sustainable decline in delinquencies is difficult to achieve without an accompanying decline in roll rates,’ says Vincent Barberio, a managing director at Fitch. Additionally, ‘The short-term beneficial effect of tax refunds may have run its course.’ Alt-A RMBS delinquencies decreased to 33.9% in May from 34.1% in April (up from 28.3% in May 2009), representing the second month-over-month decline since April 2006. California and Florida hold more than 50% of the volume of Alt-A RMBS loans outstanding. While Florida delinquencies remained unchanged at 51.7%, California delinquencies fell to 35.5% from 35.8% the prior month. After falling sharply in April, roll rates rose to 3.1% in May from 2.6%. Prior to last month's improvement, roll rates had not been below 3% since June 2008, Fitch notes. Subprime RMBS delinquencies fell in May to 44.8% from 45.2% the prior month. The roll rate for May rose to 4.3% from 3.9% the prior month, but remained well below the trailing 12-month average of 5.4%. Despite the change in performance, Fitch cautions that approximately 9% of performing Alt-A loans and 37% of performing subprime loans are modified and have a substantial risk of redefault. Prime jumbo RMBS 60+ day delinquencies rose to 10.3% for May – up from 10.2% for April and 5.9% a year ago. After nearly tripling in 2009, delinquencies are up another 1.1% since the beginning of the year. May roll rates rose above 1% after dipping below that level in the prior month, but remained below their highest-ever level (1.4%) in Performance Metrics history, which was recorded in March. California prime jumbo loan performance weakened slightly in May, with 60+ day delinquencies rising to 12% from 11.9% in April and 6.8% in May 2009. During the first five months of this year, Florida had the biggest jump (2%) of the five states with the highest volume of jumbo loans outstanding. New Jersey had the second-highest increase of the five states, growing 1.4% over the same period. The five states with the highest volume of prime RMBS loans outstanding (California, New York, Florida, Virginia and New Jersey) combined represent approximately two-thirds of the total sector. Prime jumbo RMBS 60+ day delinquencies for these states in April 2010 as compared to the prior month, and their approximate share of the estimated $358 billion market, are as follows: [list]California: 12%; up from 11.9% (44% share of the market);*New York: 7%; up from 6.8% (7% share);*Florida: 18%; up from 17.8% (6% share);*Virginia: 5.6%; the same as the prior month (5% share);*New Jersey: 8.5%; up from 8.4% (3% share).[/list] SOURCE: [link=]Fitch Ratings


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