The July remittance data brought more bad news to an already down and out market, including the deterioration of credit performance for all indices at a faster pace than the previous two months, according to a report from Lehman Brothers.
Lehman noted that the month-over-month absolute increase in delinquencies for the ABX 2007-1 index in July was 1.94%, compared with 1.66% in June. The monthly increase in delinquencies in the July remittance is the highest since January 2007, indicating significant performance worsening over the past month, Lehman said.
The ABX 2007-2 seemed to be on pace to perform as poorly as its predecessor, the 2007-1, according to UBS analysts. Among bonds in the seven-year weighted average loan age, the 60+DQ+FC+REO group of 2007-2 reached 4.46%, versus 4.1% of 2007-1.
Further, the elimination of 2/28s and the rapid rise in subprime mortgage rates cast a twin spell onto already struggling borrowers, UBS analysts said. They expected the situation to worsen in the near term.
For ABX 2006-2, UBS's loss forecasts range from 3.81% to 16.2%, and the average increased 0.22%, from 9.06% to 9.28%. For the 2007-1 index, loss estimates ranged from 6.78% to 16.85%, and the preliminary average loss for 2007-1 increased 0.77%, from 12% to 12.77%. Serious delinquencies on ABX 06-2, 07-1 and 07-2 should continue to ascend along the seasoning curves, while 06-1 will experience the post reset payment shock-related delinquency spike, UBS analysts said.
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