Alt-A Losses Outstripping Expectations, Moody’s Says

[girl gone mad]

Alt-A Losses Outstripping Expectations, Moody’s Says
By PAUL JACKSON
November 20, 2008

Severe delinquencies on recent-vintage Alt-A RMBS are quickly getting worse than expected, Moody’s Investors Service said earlier this week; the rating agency said worsening trends in Alt-A have forced it to undertake a revision of lifetime loss projections for 2006 and 2007 vintages, as a result. Moody’s last revised its loss expectations for the Alt-A sector six months ago.

As of Oct. 2008, serious delinquencies for Alt-A pools — including option ARMs — averaged 20.3 percent of current balance for the 2006 vintage and 17.5 percent for the 2007 vintage, up from 16.9 and 12.2 percent six months ago. At the same time, prepayment rates on these pools are at historical lows and are currently averaging in the mid to high single digits, Moody’s noted. Serious delinquencies refers to mortgages more than 60 days in arrears, in this case.

(In plain English, and keeping things simple: the prepayment picture here is important. Delinquencies as a percentage of current balance can go up as a matter of course as a loan pool seasons and borrowers prepay, and revintage, themselves. By stressing here that prepayments aren’t just low, but really low, Moody’s is saying that this statistical artifact is not driving the rise.)

While cumulative losses have not yet risen as steeply as delinquencies, many pools are starting to show a sharp increase in the rate of loss realization, according to Moody’s. And as the pace of liquidations has picked up, the performance data suggests worsening loss severities, as well.

http://www.housingwire.com/2008/11/20/alt-a-losses-outstripping-expectations-moodys-says/