home subscribe advertise reprints e-mail help RSS about us LOG IN

Mortgage News


Mortgage News

HOT Topics









site map

twitter linkedin
facebook google+

Mortgage News

News by Subject
Complete list of specialty news sections.

Purchase Subscription
Subscribe to MortgageDaily.com and get immediate access to all news, statistics and archives.

Mortgage Advertising
Reach mortgage executives, loan originators and other people tied to mortgage industry.

Consumer Mortgage News
Free mortgage news for prospective borrowers.

Mortgage Newsletter
Free e-mail newsletter with the latest headlines from MortgageDaily.com.

Mortgage News Reprints
Put entire MortgageDaily.com stories in your online or printed newsletter or publication.

Mortgage Feedget RSS code
Condensed MortgageDaily.com stories free on your Web site or for your RSS reader.

News Archives
Archive of MortgageDaily.com stories by month going back to 1999.

Press Releases
Reports and announcements from MortgageDaily.com.

Mortgage Statistics
Data and statistics for real estate finance.

Mortgage Directories
Directories of lenders, branch operators and mortgage service providers.

Mortgage Graphs
Directories of lenders, branch operators and mortgage service providers.

Mortgage Backed Securities | MBS News | MBS Statistics
News about commercial and residential mortgage-backed securities. Stories about ratings actions and changes to servicer ratings. Studies and reports about the performance of securitizations and problem vintages and classes. Subprime, Alt-A, home equity and j u m b o analysis.

Anatomy of ABX Indices

Moody's issues analysis of underlying deals

November 28, 2007


A new ratings agency report provides some insight into the ABX.HE indices and confirms that the transactions included in them closely track the performance of all subprime securitizations. The study identified factors that closely correlated to actual performance -- though credit scores and loan-to-values were not among them.

ABX indices were created when the International Swaps and Derivatives Association finalized the documentation for an ABS Credit Default Swap index in late 2005, according to ABX Performance Update: October 2007, a special report from Moody's Investors Service's Structured Finance division. The report was authored by Karandeep S. Bains, an associate analyst for the ratings agency.

The indices enabled investors to bet the value of subprime residential mortgage-backed securities would rise without actually buying the bonds. They also enabled investors to hedge their positions by purchasing credit protection based on ABX performance.

Four series of ABX indices currently exist, including ABX 06-1, 06-2, 07-1 and 07-2. Each index reflects ratings on 20 qualifying transactions from the largest subprime home equity ABS shelf programs that closed within the six-month period preceding their creation.

For instance, the ABX 06-01 references deals closed during the second half of 2005.

Within each series, a separate index exists for obligations rated AAA/Aaa, AA/Aa2, A/A2, BBB/Baa2 and BBB-/Baa3 by Moody's and Standard and Poor's

The deals included in each index must have had an offering size of at least $500 million, with at least 90 percent of the underlying collateral being first lien mortgages. In addition, weighted average FICO scores cannot exceed 659, no more than four deals can have the same originator and no more than six deals can have the same servicer.

"The performance of the pools underlying the ABX indices for the most part closely tracks the performance of the respective wider subprime universe," the author wrote. "However, the delinquency rate for deals underlying ABX 07-1 is trending marginally higher than the respective subprime universe at this stage."

Moody's noted the credit performance of ABX RMBS tranches and all U.S. RMBS tranches have deteriorated with each successive origination period when compared on a seasonally adjusted basis -- especially on successively lower rated tranches. But Aaa tranches have seen no negative rating actions by the agency. Moody's said it doesn't expect Aa rated tranches from ABX 06-2 and ABX 07-1 that were recently put on watch for possible downgrades to move by more than three notches.

First time buyers with limited credit histories but high FICO scores have distorted the traditional relationship between credit scores and loan performance. In addition, higher LTVs have become less of a predictor of performance.

But the share of loans with full income verification appears to be a strong indicator of deal performance, Moody's said. The same goes for the share loans with fixed rates, which was attributed to risk averse borrowers who are cautious decision makers.

Also significantly impacting performance was the originator.

"The worst performing deals in all three series tend to share the same set of originators -- Long Beach Mortgage Co., Argent Mortgage Co., BNC Mortgage Inc., Fremont Investment & Loan, New Century Mortgage Corp. and WMC Mortgage Corp.," the report stated. "The delinquencies for the weaker originators are 45 percent higher than other originators for ABX 07-1 deals at month 8, compared with 26% for ABX 06-1 and ABX 06-2 deals."

Current prices on ABX indices are quoted by Markit Group Limited at http://www.markit.com/information/products/abx.html.

Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of MortgageDaily.com.

e-mail: [email protected]

Servicing News | Servicer Ranking | Delinquency Statistics
Stories about mortgage servicers, delinquency and f o r e c l o s u r e s. Coverage of servicing lawsuits and loan servicing technology.

Nonprime and Subprime News | Subprime Statistics
Stories about non-QM products. Coverage of subprime, Alt-A and
hard money lending. Home-equity loans and home-equity lines of credit.

SUBSCRIBERS: Edit Subscription | Subscription Help | or call 214.521.1300

Subscribe Contact Us Site Map

Copyright © 2017 Mortgage Daily, D a l l a s
Subsribers Only:

AMC directory

ARM indexes

mortgage company directory

mortgage regulations

net branch directory

p r i c i n g engine directory

wholesale lender directory

More Mortgage News Resources (full site map):

advertising news

appraisal news

bank news

biggest lenders

commercial mortgage news

corporate mortgage news

credit news

FHA news

financial regulation news

foreclosure news

GSE news

jumbo mortgage news

interest rates

loan modification news

loan originator survey

LOS Newsletter


mortgage associations

mortgage-backed securities

mortgage books

mortgage brokers

mortgage compliance

mortgage conferences

mortgage directories

mortgage education

mortgage employment

mortgage employment index

mortgage executives

mortgage fraud

mortgage fraud blog

mortgage fraud local news

Mortgage Fraud Index

Mortgage Graveyard

mortgage insurance news

mortgage lawsuits

mortgage leads

mortgage lender ranking

mortgage licenses

mortgage litigation

Mortgage Litigation Index

Mortgage Market Index

mortgage mergers

mortgage news

mortgage politics

mortgage press releases

mortgage production

mortgage public relations

mortgage rates

mortgage servicing

mortgage statistics

mortgage technology

mortgage video

mortgage Webinars

net branch

net branch directory

nonprime news

origination news

originator tools

real estate news

refinance news

reverse mortgage news

secondary marketing

social media

servicing news

subprime news

wholesale lenders