April remittance reports released last week reflected a continued dip in the 30- and 60-day delinquency buckets in most trusts across all the indices, Barclays Capital analysts reported.
According to Barclays, the 30 to 59-day delinquency buckets dropped 1.1% and 60 to 89-day buckets dipped 0.6% on average. Roughly 45% of these bonds had higher 30- and 60-day delinquency buckets. "This is somewhat foreboding, as the April remittance date has historically yielded improving performance," Barclays analysts wrote. "In addition, later stage delinquencies, including REO and foreclosure buckets, continue to increase fairly quickly."
Some analysts had a more positive view of the numbers. According to Countrywide Securities researchers, lesser-delinquent categories exhibited some signs of stabilization. They pointed to the 30- and 60-day delinquency buckets, which they refer to as loans that are one or two payments late. Analysts said that delinquencies in these buckets were slightly lower over the month of April in the two 2006 indices. Furthermore, these were also virtually the same in April for the two 2007 indices.
"The stabilization of less-severe delinquent loans across the ABX indices provides at least some modest positive longer-term news on subprime credit performance from the 2006-2007 timeframe," Countrywide analysts said. This implies, analysts said, that fewer loans are newly emerging as delinquent. However, there remains a significant number of mortgages that are "in the system" that will still negatively affect future credit performance. Countrywide said that, as these mortgages go through the delinquency life cycle, cumulative losses will still rise.
The monthly aggregate 60+ day delinquencies increased 125 basis points for series 06-1, 45 basis points for 06-2, 130 basis points for 07-1, and 166 basis points for 07-2, according to Barclays' analysts. This is versus the increases seen in March of 163 basis points for series 06-1, 391 basis points for 06-2, 143 basis points for 07-1, and 207 basis points for 07-2. Analysts said that, considering the seasonal pattern of significant percentage change improvements in 30- and 60- day delinquencies typically seen in April, "this latest report portends additional collateral performance deterioration over the next several months."
Countrywide analysts also noted that in the more serious categories of credit performance, combined foreclosure plus REO rose once again across all indices in April. They reported that for the month, the 2006-1 through 2007-2 indices exhibited a rise in foreclosure plus REO of 90, 156, 90, and 134 basis points, respectively, for each of the indices.
"On a positive note, the increases in foreclosure plus REO were noticeably less than the respective increases seen in March," Countrywide analysts wrote. In March, there were 178, 203, 116, and 181 basis points for the 2006-1 through 2007-2 indices, respectively, according to Countrywide.
Analysts added that absolute foreclosure levels plus REO seem to be ramping up for more recent indices. For example, they said that at 16%, foreclosure plus REO for the 2007-2 index is roughly 40% higher versus the level for the 2007-1 index six months earlier. This is the same relative reporting period as April's report for the 2007-2 index. "This suggests that the 2007-2 should prove to be the weakest long-term credit performer," Countrywide analysts wrote.
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