December remittance reports, relfecting the November collection period, were released late yesterday.
The reports showed a continuation in the following trends: moderating defaults, buildup
of the 60+ delinquency bucket, as well as lower prepayment speeds.
According to a report from Barclays Capital, default rates dropped by an unusually large 2.4 CDR in aggregate, which is the fifth consecutive monthly drop.
Defaults dipped by 2.98, 2.29, 1.97, and 2.45 CDR across the 06-1 to 07-2 series. This implies, according to Barclays analysts, a further dip in REO liquidation rates as servicers wait for the results of modification trials.
The analysts think that CDRs will stay low in the next few months as servicer foreclosure paralysis continues to shrink REO buckets.
Severities changed by -1.69, 2.77, -1.31, and -1.08 points for the 06-1, 06-2, 07-1, and 07-2 series, respectively.
Although they anticipate that the lengthening foreclosure times will bring up severities in the medium term, the loans currently being liquidating were generally not subject to foreclosure
bottlenecks.
They added that the flip side of foreclosure paralysis is a slow build-up in the seriously delinquent and foreclosure categories.
Aggregate 60+ delinquencies, including foreclosure and REO, increased 74, 89, 113, and 108 basis points across 06-1 to 07-2, which is roughly in line with the rises since September, Barclays analysts said. They anticipate the backlog of 60+ loans to continue to rise over the winter months.
They added that early stage delinquencies slightly dropped, with 30-day buckets changing by negative 13, negative 11, nine, and negative eight basis points, respectively.
Historically, seasonal effects on current-to-30 roll rates are relatively small for the December remittance report, but considerable (+10%) in January, they said. This is why lower roll rates in this report imply modest, althought genuine improvement in underlying subprime borrower behavior.
Voluntary prepays were also generally lower, with CRR changing by negative 99, negative 23, negative 37, and 46 basis points across 06-1 to 07-2. Analysts expect considerable medium-term upside from currently depressed prepay levels.
As usual, these speeds include the effects of P&I recapitalizations, which can artificially limit reported speeds, Barclays analysts said.
