The October remittance reports - which represented the collection period for September - showed mixed results.
For one, ABX 06-1 60+ day loan delinquencies continued to level off at 36%, and the rises in 60+ day delinquencies versus September's numbers for the 06-2, 07-1 and 07-2 indices are each lower than 2%, according to Merrill Lynch analysts.
Meanwhile, the average 30 to 59 days past due is still rising compared with last month, for the second consecutive month. According to a Credit Suisse report, the weak economy and job market along with the negative year-end seasonal trend will continue to pressure mortgage performance downward.
Credit Suisse analysts said that the renewed increase in constant default rates (CDRs) aided the slowdown in the rise of 60+ days past due loans that include bankruptcies, foreclosures and REO. Analysts said that 06-1 experienced an 18% rise to 24.5 from 20.7 CDR in September, with 06-2 rising to 22.5 from 20.4 CDR and 07-1 to 18.4 from 15.6 CDR. The rise in 07-2 CDR was comparatively mild, Credit Suisse said, up to 14.2 CDR from 13.5 the previous month.
Barclays Capital analysts noted that in September, CDRs had been decelerating as price discovery on distressed inventory and subsequent liquidations had slowed. "This month's increase in CDRs contradicts the slowing trend observed in recent months and may signal that servicers are more willing to sell distressed properties at deeper discounts," they wrote.
In terms of delinquency buckets, collateral performance was mixed as well. Barclays analysts reported that early-stage delinquencies (30 to 59 days) increased for all series.
By contrast, they said that 60- to 89-day delinquencies dropped for Series 06-1 and 06-2 but at the same time rose for Series 07-1 and 07-2. Foreclosures also dipped slightly for Series 06-2 and 07-2 but remained comparatively the same for series 06-1 and increased for series 07-1.
Meanwhile, Merrill Lynch analysts said that prepayment slowed significantly compared with historical levels seen in the last few years. "Given the limited refinancing opportunities available, they are commensurate with the environment," the analysts wrote. For example, the 07-2 transactions reflected 18% one-month CPR at 21 WALA. This is compared with 27% for their 06-1 counterparts of the same WALA.
Loan modifications rose during the month, with 1,734 modifications versus 1,351 loans in September, according to Credit Suisse. The rise in these modifications was focused on the 07-1 and 07-2 series.
JPMorgan Securities analysts noted that bond write-downs still ate up the capital structure and also slowly contaminated more transactions. Analysts said that on two of the worse deals - LBMLT 06-6 and SAIL 06-4 - the single-A ABX constituents are now more than half gone. More ABX transactions or tranches have also begun to have realized losses, including SASC 07-BC1 and 06-BC4, HEAT 07-2 and SVHE 06-OPT5, JPMorgan analysts noted.
Notable events that relate to the index included Wells Fargo as trustee planning to offer RMBS loan modification information, beginning with the November reports that are based on American Securitization Forum and rating agency recommendations. But, JPMorgan said that the trustee reports will be limited to what is reported by the servicers.
Also, Markit postponed the ABX 05-2 launch indefinitely, citing market conditions.
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