25 November 2008

“Dramatic Rise” in Alt-A Loan Delinquencies May Continue

CreditSights reports a “dramatic rise” in the number of delinquent Alt-A borrowers over the past three months, and anticipates a further increase in delinquencies in these “not-quite prime” mortgages by the end of this year.

According to CreditSights’ Alt-A Residential Mortgage-Backed Securities sample:
The 2007-RMBS experienced their largest three-month rises in delinquencies yet. Delinquencies grew by 167 bp to 6.8% of the remaining balance.
The growth in foreclosures slowed slightly in the three months to October.
The number of loans that are in or near default rose roughly 200 bp in both the 2006 and 2007 Alt-A RMBS to respectively 16.4% and 12.6% of the remaining balances.

Now that delinquencies have started to rise once more - and given that foreclosures and REOs have, like delinquencies, tended to accelerate into year end - we expect to see the growth in foreclosures and REOs to pick up once again.


CreditSights’ detailed analysis is available here

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