Prime Mortgage Performance Deteriorates at Alarming Pace, DBRS
By: Mike Scorelle 2010-01-20
“The performance of prime residential mortgage transactions has weakened substantially since issuance. The deterioration was particularly alarming in the past 12 months,” DBRS said in a recent report.
On average, the serious delinquency rates for the 2005 to 2008 vintages have risen 47% (weighted by the total outstanding balance of each vintage) from a year ago.
The report notes that 2008 vintage delinquencies have nearly tripled since December 2008, and the remaining vintages have each exhibited a 66% (2007), 59% (2006) and 13% (2005) increase respectively.
“Despite the fact that prime mortgages still display the lowest overall defaults and expected losses, the rate of increase in prime delinquencies is, in fact, the most pronounced.
For example, comparing the same period from December 2008 to December 2009, the subprime sector only experienced a 12% increase in serious delinquencies, as opposed to 47% for prime pools.
Moreover, with the exception of 2008 and some 2007 transactions, subprime vintages seem to have generally reached the peak of their defaults and have exhibited signs of stabilization for the time being,” the report continued.
“Within the prime sector, there is a clearly discernable trend between fixed rate and adjustable rate collateral. Measured by the latest serious delinquency rates, fixed rate prime mortgages on average performed 40% better than their ARM counterparts. The trend is particularly evident for the 2007 vintage,” the report concluded.
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