The September remittance reports revealed that conditions in the mortgage market are worsening, although the rate of credit performance dislocation is mostly slowing, according to a UBS report.
Delinquency rates in the buckets - 30, 60+, FC+REO - have increased, according to UBS's data. However, while the delinquency increases for FC+REO continued unabated, the rate of delinquency increases for all 30DQ and three out of four 60+DQ indices have eased. UBS reported a "somewhat surprising" 1.83% increase in FC+REO rates among ABX07-1 deals.
Meanwhile, ABX06-1 deals saw an increase of 1.43%, which UBS analysts credited to the impact of resets and reduction in pool factors. Cumulative losses jumped to 13 basis points from 10 basis points on all indices except ABX07-02.
The September data, with their increased delinquencies and foreclosures, do not come as a surprise, as the subprime market remains unstable.
"Our whole stance on this entire debacle right now is that it's so perfectly predictable that it's boring," said Michael Bykhovsky, CEO of Applied Financial Technology. "If we feed current [Home Price Indices] and projected HPIs into the model, the resulting delinquency output is very much consistent with what we are observing."
"What does astonish me still is that people who were basically lending money to investors in those type of securities did not bother running analysis that involved the simulation of various HPI outcomes," Bykhovsky said. Instead, he said, historically low loss numbers were used to produce historically high HPI projections.
Citigroup Global Markets reported still "more bad than good" for the indices, despite the slowdown in delinquency rates. The "hint of positive news," according to Citigroup, was only in the second index. The report stated that the slowdown in 30-day delinquencies could be attributed to "a genuine reduction of the truly bad loans" as well as an increase in servicers proactively managing delinquencies earlier , although Citigroup analysts called these conclusions premature.
Barclays Capital, meanwhile, also reported an increase in the level of delinquencies across all four series, but slower movement in the month-to-month data.
The September remittance report from Wachovia Capital Markets did not contain the silver linings that some of the other reports did, as its analysts reported a faster increase in delinquency rates. The average jump was between 144 basis points and 211 basis points, according to its data. Foreclosures also rose faster in September, with an average jump of 81 to 98 basis points, compared with 61 to 66 basis points in August.
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