The August remittance reports showed default rates at 9.4, 9.7, 10.5, and 11.0% CDR for the 06-1 through 07-2 indices. These, according to Bank of America Merrill Lynch analysts, represent changes of -0.5, -1.5, -0.7, and +0.3 points, respectively.

Meanwhile, they noted that defaults have remained range bound in the 9%-11% CDR range since the foreclosure issues that started last year.

In terms of delinquencies, there was a rise in early-stage delinquencies with those levels rising by around 0.3 points. But, later-stage delinquencies dropped by 0.4-0.5 points.

As the foreclosure process begins to clear up, analysts said that more loans have been transitioning from seriously delinquent into foreclosure. During the month, foreclosures rose by 0.3-0.4 points, roughly the same number that the 60+ delinquencies droped. REO inventory remained comparatively flat.

Meanwhile, voluntary prepays are still non-existent at 1.0%-2.0% CPR averaged across the indices. The 06-1 witnessed prepays rising from 1.8% to 2.7% CPR, BofA Merrill analysts noted.

Meanwhile, the loss severities were flat to down for most of the indices this month except for 06-1, where they increased by 3.6 points to 80.9%. The remainder of the indices dropped by 0.8, 0.0 and 1.8 points, to 85.9%, 92.7% and 90.1% for the 06-2 to 07-2 indices, respectively, analysts noted.

The measure covers losses resulting from loan modifications because of forbearance recognition, principal forgiveness, and/or the recovery of servicer advances. Litton Loan Servicing and Ocwen Loan Servicing (HomEq Servicing) severities stayed high at 120% and 117%, respectively.

JPMorgan Chase (EMC Mortgage Servicing Corp.) severities rose by 25 points this month increasing to 115%.

Otherwise, inspite of the longer timelines and weak home prices, severities, although somewhat volatile, they have overall stayed fairly range-bound in the past six months.

BofA Merrill analysts also noted that modification rates dropped for the 06-2 to 07-2 indices  while the rate increased for 06-1, which saw a rise of 0.23 points. The rise in modifications contributed to the increase in severities for that index. The other indices decreased on average by around 0.11 points. While overall modification activity has dipped over the past year, the share of principal modifications has started to rise, analysts noted.  

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