“Loan modifications have not significantly reduced foreclosure efforts to date,” Costello said.
Roll rates for 2008 vintage subprime first liens are significantly higher than in previous vintages; those roll rates are provided in the graph to the right. Roll rates capture the number of loans moving from current to deliquent each month — and the graph shows that 2007 vintage loans are rolling into default at a greater than 4 percent rate. Per month. Every month. Consistently. And that only includes originations through the third quarter of last year, to boot.
That’s huge, for anyone outside of the industry that hasn’t seen this sort of data before, especially given how new these loans are.
What’s worse, we’re not just looking at a subprime problem, as many HW readers already know. Below is a look at annualized default rates for Alt-A mortgages.
Note that the Q307 vintage was already above a 10 percent annualized monthly default rate by end of December. Astounding. The culprit, or course, was an acceleration in housing price declines that put many borrowers upside down — and, given the incidence of fraud in most recent Alt-A vintages, a whole bunch of borrowers suddenly found themselves unable to refinance their way into another loan as lenders finally began to tighten their underwriting standards.
Fitch released a report in November of last year detailing the high incidence of borrower fraud in recent originations, particular Alt-A.
I’ve written before that until home prices stabilize, we’re going to be looking at a free fall in the large parts of the RMBS market; this sort of data helps tell the story of why this will be the case.