Differences in judicial and non-judicial foreclosures over the past several months have meant some securitized private-label subprime/Alt-A mortgages made to borrowers in the what is still considered a relatively weak — though improving — California market, for example, are actually exhibiting better performance in some ways as a group than their counterparts in the relatively stronger New York market.
“It’s very interesting and probably a little surprising,” Jonah Green, director of analytics for 1010data said.
Green said a joint 1010data/American Securitization Forum remittance report — which tracks by state the percentage of securitized loans in a particular category that are 60-plus days delinquent, in real estate owned, foreclosure or bankruptcy — illustrates the point.
The report shows there are more 2004-2008 vintage subprime and Alt-A loans in those categories in New York than in California. (He stressed that this is not necessarily true for other loan categories such as conforming and jumbo.)
Green said in October, for example, 44% (on a dollar weighted basis) of these securitized loans outstanding were in this category in New York compared to only 38% in California.
He attributed this to primarily to the effect of the differences in judicial process on recovery lags (defined as the time between the last date a borrower makes a payment until the loan is liquidated) in securitized first-lien loans.
Recovery lags for securitized alt-A/subprime averaged 32 months in New York compared to only 19 in California. Green noted that this is over a one-year difference.
Comparatively, in October 2009, recovery lags were 27 months in New York and 16 months in California, he said.
When asked whether foreclosure-processing concerns that have been said to slow the process contributed to the trend, Green said it was occurring before these concerns surfaced.
In addition to differences in judicial compared to non-judicial states, Green said he believed differences in the unemployment rate also could have played a role in the differences between recovery lags.
New York’s unemployment rate, while still reflecting weakness, is relatively stronger than California’s and could have led sellers to have more tolerance for leaving properties on the market longer in an effort to get better prices.
He noted that according to the Bureau of Labor statistics, the seasonally adjusted unemployment rate in California increased to 12.4% from 12.2% between October 2009 and October 2010, while the comparable unemployment rate in New York State fell during that time period from 8.9% to 8.3%