The highest delinquency to date of any post-crisis U.S. residential mortgage backed securities emerged in May, but it was due to a transfer of servicing of mortgages backing the deal and does not point to more widespread post-crisis late-pay increases, according to Fitch Ratings.
Sequoia 2014-1 reported that 3.37% of borrowers were behind on their payment. All of the delinquent mortgage loans in Sequoia 2014-1 had been recently transferred to Cenlar FSB. In a report published Monday, Fitch said that it has spoken with the issuer about the transfer.
“Early delinquency related to servicing transfers in recent RMBS is typically due to the borrower mailing the payment to the wrong address and generally doesn't result in longer term payment issues,” said managing director Grant Bailey. In fact, only one borrower became 60+ days delinquent of the 121 borrowers in recent RMBS pools that were delinquent in the first three months.
RMBS printed since the financial crisis have been backed almost exclusively by jumbo’ mortgages those too big to be sold to Fannie Mae or Freddie Mac - to borrowers with extremely high credit.
There have been approximately 48 prime transactions totalling $19.1 billion issued since the market re-started in 2010. Most of that volume placed over the past 24 months.
In fact, prime jumbo vintages securitized over the last four years are exhibiting even stronger attributes than those securitized prior to 2005, long considered an industry benchmark for traditional prime lending, according to Fitch. Post-crisis RMBS contain higher FICO scores (771), lower combined loan-to-value ratios (68% versus 70%) and more loans that are fully documented (100% versus 64%) than deals that came to market prior to 2005.
However one serious delinquency unrelated to a servicing transfer also emerged in May in RMBS deals originated post-crisis; the deal, CSMC 2013-7, is not rated by Fitch. The mortgage borrower in question has a 756 FICO and a 57% loan-to-value. “Of the 17 borrowers in recent RMBS pools that went over 60+ days delinquent, only one did not subsequently cure,” said Bailey.
Prepayment rates also rose to double-digits in May for nine recent mortgage pools, reflecting mortgage rates that fell to their lowest levels since last year. Overall constant payment rates across all vintages remain near historical lows, at 6%.