Remittance reports for the August distribution date, representing the July collection period, were released today.
Collateral performance stabilized versus last month, as proven by slightly lower early delinquencies as well as moderating default rates across most series, according to a Barclays Capital report. Meanwhile, severities were flat or lower across indices, except for the 07-2 series.
After rising from June to July, default rates dropped across most indices in August. Barclays analysts expected seasonals to carry CDRs higher this month. Moderating CDRs over August
imply that a dipping REO bucket may be restricting aggregate liquidations.
CDRs are now 19.3, 22.4, 19.1, and 21.3 for the 06-1 through 07-2 indices, respectively,
an absolute change of –3.3 pts, -2.7 pts, -1.9 pts, and 1.2 pts from the previous month.
Notable, according to Barclays analysts, is that the CMLT 2007-AMC2 transaction, which is a constituent of the 07-2 series, posted a 40 CDR in August. This is a 30 pt rise from the previous month. Aside from this deal, CDRs for the 07-2 series would have dropped as well, by 40 basis points, Barclays noted.
The total 60+ delinquencies generally grew in line with last month, according to Barclays analysts. Aggregate 60+ day delinquencies rose 39 basis points, 38 basis points, 76 basis points, and 61 basis points for 06-1 through 07-2 indices, versus changes of 13 basis points, 48 basis points, 86 basis points, and eight basis points last month, the firm noted.
Regarding the components of 60+ delinquencies, Barclays said that the REO bucket had been dipping by 4% to 8% depending on the series. Additionally, the 60-89 bucket also dipped across indices except for the 06-1 series and the foreclosures and 90+ delinquencies still went up across indices.
Additionally, early stage delinquencies (30-59 day) came in flat to lower across indices, Barclays noted. The shifts in the 30-day bucket were two basis points, negative 14 basis points, negative 14 basis points, and three basis points for the 06-1 through 07-2 series.
In the firm's Aug. 24 report, the credit forecast for August remits 30-day delinquent roll rates continued to improve, with much of the improvement resulting from better performance from underwater borrowers. This month’s further stabilization is a positive sign, analysts stated.
Severity averaged 70.4%, 71.7%, 73.2%, and 73.2% for series 06-1, 06-2, 07-1, and
07-2, respectively.
This is an absolute change from last month of 0.3%, negative 0.1%, negative 0.4%, and 2.3% across the four indices. Barclays analsyts once again stated that the severities that they reported were based on liquidated loans, which excluded losses resulting from modified loans.
SPS continues to use principal forgiveness in a considerable part of its modifications. Taking HEAT 2007-2, as an example, severity based on liquidated loans was 71.5%, while severity including modified loans was 79.5%, an 8pt difference.
Additionally, Barclays said that some deals with low CDRs are posting particularly volatile severity numbers month to month. For instance, the CARR 2006-NC1 deal reported a 52.9% severity in August, relative to 76.5% in July, which is a 24 pt difference. The CDR for this deal was 5.7, which is much lower compared with the index average of 22.4. This implies that the small number of loans is introducing volatility to the severity calculation, Barclays analysts said.
Voluntary prepays were mixed, Barclays analysts noted, posting changes of 23 basis points, negative three basis points, negative 15 basis points, and negative 78 basis points across indices. Analysts noted that CRRs are reduced by P&I capitalizations on modified loans.
The aggregate voluntary prepayments have been coming in 1.0-2.5 CRR over the past few months, and they this will continue in the near term.
The JPMAC 2005-OPT1 deal passed triggers for the thirteenth straight month as well as released principal payments to noteholders, noted analysts. This month, Barclays said that the beneficiaries were class M5 and M6 noteholders, which received $3.3 million and $0.9 million, respectively.
The margin by which the transaction passed its delinquency trigger (27.91% actual versus 28.64% threshold) was slightly smaller compared with the previous month (27.82% actual versus 28.77% threshold).
The total 60+ delinquencies for this transaction were comparatively unchanged from the previous month, and the transaction will probably continue to step down in the near term.
