Rebel Traders – Analysis Without The Hype

Fitch ratings has released an update on Residential Mortgage Backed Securities.

Fitch: California prime jumbo RMBS delinquencies rise to 11.6%; Florida to 17%

California prime jumbo loan performance continued to weaken in February, with 60+ days delinquencies rising to 11.6% from 11.3% in January (and 4.7% in February 2009). During the first two months of 2010 Florida had the biggest jump (nearly 1%) of the five states with the highest volume of jumbo loans outstanding. New Jersey was second of the five states with an 80 basis points (bps) increase over the same period.

The five states with the highest volume of prime jumbo loans outstanding (California, New York, Florida, Virginia, and New Jersey) represent approximately two-thirds of total  delinquencies. Prime jumbo RMBS 60+ days delinquencies for these states at February 2010 compared to the prior month, and their approximate share of the estimated $376 billion market, are as follows:

–California: 11.6%, up from 11.3% (44% share of the market);
–New York: 6.3%, up from 6.1% (7% share);
–Florida: 17%, up from 16.6% (6% share);
–Virginia: 5.7%, up from 5.6% (5% share);
–New Jersey: 7.9%, up from 7.4% (4% share).

From the ‘ouch’ files:

Standard & Poors has said it is highly likely that it will downgrade residential mortgage backed securities (RMBS), those securities have a current reported balance of $537.9 Billion (down from $962 Billion). The action, if taken, would downgrade 12,000 classes of prime, subprime, and Alt-A securities issued from 2005 through 2007.

It is the losses that these securities are experiencing that has put the downgrade in the category of ‘highly likely’.

And this from the New York Times:

[…]The number of Americans who owed more than their homes were worth was virtually nil when the real estate collapse began in mid-2006, but by the third quarter of 2009, an estimated 4.5 million homeowners had reached the critical threshold, with their home’s value dropping below 75 percent of the mortgage balance.

They are stretched, aggrieved and restless. With figures released last week showing that the real estate market was stalling again, their numbers are now projected to climb to a peak of 5.1 million by June — about 10 percent of all Americans with mortgages.

“We’re now at the point of maximum vulnerability,” said Sam Khater, a senior economist with First American CoreLogic, the firm that conducted the recent research. “People’s emotional attachment to their property is melting into the air.” […]

The housing market will continue to deteriorate well into 2010, and perhaps even into 2011 before there is a significant bottom in housing prices. Nothing to date suggests that the housing market is recuperating from its drug induced (easy and unethical lending practices)high that the banks brought onto the market.

The patient (housing market) is still dying, however the banks and the Obama administration keep trying to pump more and more of the same drug that killed it in the first place, right into its heart.

Moody’s has tonight updated the loss projections for subprime residential mortgage backed securities (RMBS) issued 2005 to 2007.

Moody’s Investors Service has revised its loss projections for US subprime residential mortgage backed securities (RMBS) issued between 2005 and 2007.

On average, Moody’s is now projecting cumulative losses of 18.7% for 2005 securitizations, 38.4% for 2006 securitizations, and 48.1% for 2007 securitizations, reported as a percentage of original balance.

As a result of the revision, Moody’s has now placed 5,698 tranches of subprime RMBS with an original balance of $584 Billion and outstanding balance of $319 Billion, on review for possible downgrade.

Even though the Case-Shiller index in recent months has reported very modest home price gains, Moody’s believes the overhang of impending foreclosures will impact home prices negatively in the coming months.

From the wires:

Moody’s Updates Loss Projections For Us Prime Jumbo Rmbs Issued In 2005-2008

Moody’s Investors Service has revised its loss projections for US prime jumbo residential mortgage backed securities (RMBS) issued between 2005 and 2008. On average, Moody’s is now projecting cumulative losses of 3.8% for 2005 securitizations, 8.0% for 2006 securitizations, 10.9% for 2007 securitizations and 12.3% for 2008 securitizations, reported as a percentage of original balance.

As a result of the revision, Moody’s has now placed 4474 tranches of jumbo RMBS with an original balance of $234 billion and current outstanding balance of $143 billion, on review for possible downgrade.

The rapidly deteriorating performance of jumbo pools in conjunction with macroeconomic conditions that remain under duress prompted today’s announcement.

This evening Moody’s has placed under review for downgrade hybrid and subordinated debt totaling $450 Billion of securities.

Moody’’s Investors Service has placed under review for possible downgrade the ratings of 775 hybrid and subordinated debt securities issued by 170 bank families in 36 countries following a change to its rating methodology for these instruments.

The reviews follow the rating agency’’s announcement that it has changed the way in which it rates these securities to take into account the fact that some recent government interventions in troubled banks have not helped, and have even been to the detriment of, the holders of these types of securities. For example, in some cases, support packages have been contingent upon a bank’’s suspension of coupon payments on these instruments as a means to preserve capital.

I say again.. We keep being told that everything is getting better. This only shows more (not less) deterioration is taking place within the financial markets.

Late this afternoon JP Morgan (JPM) had $6 billion worth of their RMBS (residential mortgage backed securities) downgraded by Moody’s due to the deteriorating mortgage situation.

Moody’’s Downgrades $6B Of RMBS Issued By J.P. Morgan Mortgage Trust And Chl Mortgage Pass-Through Trust

Moody’’s Investors Service has downgraded 217 tranches and confirmed 3 tranches from 9 deals issued by J.P. Morgan Mortgage Trust and CHL Mortgage Pass-Through Trust in 2006 and 2008.

The collateral backing these transactions consists primarily of first-lien, fixed and adjustable-rate, Jumbo mortgage loans.  The actions are triggered by the quickly deteriorating performance — marked by rising delinquencies and loss severity, along with concerns about the continuing drop in housing prices nationwide and the rising unemployment levels. The actions listed below reflect Moody’’s updated expected losses on the jumbo sector announced in a press release on March 19th, 2009, and are part of Moody’’s on-going review process. (emphasis added)

Among the tranches downgraded include:
- CHL Mortgage Pass-Through Trust 2008-1
- Cl. A-1, Downgraded to Ba3; previously on 4/9/2009 Aaa Placed Under Review for Possible Downgrade
- Cl. A-2, Downgraded to Baa1; previously on 4/9/2009 Aaa Placed Under Review for Possible Downgrade
- Cl. A-3, Downgraded to A3; previously on 4/9/2009 Aaa Placed Under Review for Possible Downgrade
- Cl. A-4, Downgraded to A3; previously on 4/9/2009 Aaa Placed Under Review for Possible Downgrade
- Cl. A-5, Downgraded to Baa2; previously on 4/9/2009 Aaa Placed Under Review for Possible Downgrade
- Cl. PO, Downgraded to Ba3; previously on 4/9/2009 Aaa Placed Under Review for Possible Downgrade
- Cl. X, Downgraded to A2; previously on 4/9/2009 Aaa Placed Under Review for Possible Downgrade

Green shoots?

Yet again we find residential mortgage-backed securities (RMBS being downgraded due to increased loss potential. Tonight after the market closed Standard and Poors downgraded 250 classes of RMBS transactions which are backed by ALT-A and prime jumbo mortgages.

The ratings downgrades impact transactions of loan collateral issued in 2005, 2006, and 2007.

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

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From the wire services:

S&P: 9,430 US ALT A RMBS CLASSES FROM ”05,”06,”07 ON WATCH NEG; THE AFFECTED CLASSES HAD AN ORIGINAL PAR AMOUNT OF ABOUT $552.8B AND HAVE A CURRENT PRINCIPAL BALANCE OF $445.4B

• The CreditWatch placements reflect an increase in S&P’s projected losses for Alt A transactions from these vintage years.

• Our revised loss projections reflect an increase in our loss severity assumptions for Alt-A transactions issued in 2005 through 2007. This change is based on our belief that the influence of continued foreclosures, distressed sales, an increase in carrying costs for properties in inventory, costs associated with foreclosures, and more declines in home sales may depress prices further and lead loss severities higher than we had previously assumed.

• Additionally, there has been a persistent rise in the level of delinquencies among the Alt-A mortgage loans supporting these transactions. As  of the February 2009 distribution date, what we consider severely delinquent loans (90-plus days, foreclosures, and REOs) for the affected transactions accounted for, on average, 22.92% of the current aggregate pool balance. Over the past three months, severe delinquencies have increased by 24.50%.(emphasis added)
  

Standard & Poors has revised their loss assumptions for RMBS Prime and sub Prime:

Due to the generally poor outlook for the U.S. housing market, increased  delinquencies and defaults, and residential inventory buildup, Standard &  Poor’’s is projecting that the underlying mortgage pools supporting subprime  RMBS transactions issued in 2006 will experience aggregate cumulative losses  ranging from 23% to 27% of the original principal balance, with an average of  approximately 25%, and pools supporting transactions issued in 2007 will  experience aggregate cumulative losses ranging from 28% to 32%, with an  average of approximately 31%.
Additionally, Standard & Poor’’s is projecting losses on the underlying mortgage pools supporting prime RMBS in the 0.04%-13.54% range, with an average of approximately 3.65% for 2006 transactions and 0.13%-19.52%, with an  average of approximately 4.50% for 2007 transactions. The upper end of the loss ranges reflects the performance of a few outliers, while the majority of the transaction-specific loss projections are more closely distributed around the averages.

Housing Wire reports:

Citing “a rapid deterioration of U.S. Alt-A RMBS performance,” Fitch Ratings again took the hatchet to its previous assumptions for Alt-A mortgages on Monday morning, revising its surveillance methodology and updating loss projections for all U.S. Alt-A RMBS.

The rating agency said it now expects average cumulative losses on 2005, 2006 and 2007 vintage Alt-A transactions to hit 2.72, 6.78 and 9.58 percent, respectively, up dramatically from expectations at the agency earlier this year.

Fitch cited a “rapid increase in 60+ day delinquencies experienced over the past six months,” despite servicers’ collective efforts to hold off on actual foreclosure sales [...]

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