The latest ABX remittance data showed that CDR levels increased modestly in July, as average values for each index ranged from flat to up 1.4 points, according to Bank of America Merrill Lynch analysts.
Falling CDR levels have been the general trend for the past few years, as servicers have worked through the modification process to extend workouts to distressed borrowers.
However, CDRs have been leveling off for the past few months in the subprime sector, BofA Merrill analysts said.
Severities also increased modestly for each index, with values for the 06-1, 06-2, 07-1, and 07-2 indices at 71.7%, 73.2%, 78.8%, and 78.1%, respectively, representing an average increase of 0.9 points.
There was an increase of 1.8 points in the 07-1 index. Severities on the BSABS deals were substantially higher in July, increasing 146% and 105% for the 07-1 and 07-2 indices, respectively. The BSABS transaction are serviced by EMC Mortgage Corp.
The exception is BSABS 2006-HE3, in the 06-2 index, which is half-serviced by Wells Fargo.
Additionally, modification rates showed a slight increase, up an average of 0.2 points across indices to 1.36%, 1.56%, 1.50%, and 1.64% of loans for 06-1 through 07-2, respectively, according to BofA Merrill analysts.
The subprime sector is the most susceptible to modifications because of its distress and high loan coupons, BofA Merrill Lynch analysts said.
They expect slightly rising modification rates as Home Affordable Modification Program (HAMP) trials become converted in the future.
