Moody’s issued a substantial report after the market closed today. The report, which evaluates the loss projections for jumbo loans and the associated RMBS has been updated to reflect continued deterioration in the market.
Moody”s Updates Loss Projections For ”05, ”06, ”07 and ”08 Jumbo Rmbs
- On average, Moody”s is now projecting cumulative losses of about 1.70% for 2005 securitizations, 3.55% for 2006 securitizations, 5.05% for 2007 securitizations and 6.20% for 2008 securitizations (all loss projections are reported as a percentage of original balance of loans securitized for each vintage).
- As a result, it has placed 4,988 tranches of Jumbo RMBS with an original balance of $240.7 billion and current outstanding balance of $173.3 billion, on review for possible downgrade.
- Approximately 70% of the senior securities issued in 2005 are expected to maintain investment grade ratings.
- The remaining senior securities from this vintage are expected to migrate to Ba/B ratings.
- A vast majority of the senior securities issued in 2006 are expected to migrate to a rating ranging from Baa1 to B3 or, in the case of about 35% of the senior securities, to ratings below B3.
- For senior securities issued in 2007, about 20% are expected to migrate to a Ba1-Ba3 rating.
- The majority of the senior securities from this vintage are expected to migrate to ratings below B3.
- In all cases, super senior bonds which are supported by other senior securities that are first in line to take losses once subordinate bonds are written down will benefit from the additional credit protection and could maintain investment grade ratings.
- Moody”s concludes that in most cases, subordinate securities from 2006, 2007 and 2008 transactions will likely be completely written down.
- Moody”s is likely to downgrade the ratings of these securities to Ca or C.
- The rating agency says that during the last six months, Jumbo mortgage loans backing 2005 to 2008 securitizations have shown substantial increases in serious delinquencies and decreases in prepayment rates — levels that are unprecedented for this asset class.
- Borrowers who are 60 or more days delinquent on their payments, have had foreclosure proceedings started against them or properties that are held for sale comprise 1.6%, 2.9%, 3.6% and 3.75% for the 2005, 2006, 2007 and 2008 vintages respectively.
- Moody”s is estimating that eventual default rates for borrowers who become seriously delinquent by end of 2009 on jumbo pools from 2005, 2006, 2007 and 2008 vintages will be 2.3%, 3.9%, 5.0%, and 6.2% respectively (reported as a percentage of original pool balance).
- Because Moody”s expects a further 11% decline in home prices, it has assumed average losses on defaulting jumbo mortgages to be approximately 40% — which is higher than historical severities.
(emphasis added)
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More on this topic
(What's this?)
WSJ: 30% Down Payments, $69k Homes
(Healdsburg Housing Bubble, 2/24/09)
SF median home price jumps 12%
(Investing Thoughts, 6/19/09)
RMBS LOSS ESTIMATES UP SHARPLY
(THE PRAGMATIC CAPITALIST, 3/25/09)
Is Moody’s making those analysis and comments the same agency that rated all those products AAA+ only 2 years ago ???
How can they be credible ?
Well, yes and no, stephane…
More Quickly Than It Began, The Banking Crisis Is Over
http://www.time.com/time/business/article/0,8599,1890560,00.html
Moody’s can revise everything now, yet again. We’re saved. What a relief!