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Jumbo Delinquency Rises

S&P reports 0.397% 60-day delinquency

July 20, 2007

By MortgageDaily.com staff

Delinquency on jumbo loans rose for the third consecutive quarter. But two ratings agencies say there is no need to worry.

Delinquency of at least 60 days was 0.37 percent for the first quarter on jumbo mortgages, Moody's Investor Service announced today. Delinquency rose from 0.289 percent a year earlier.

While the increase reflects "a less favorable mortgage environment characterized by higher interest rates and a slower pace of home price appreciation," Moody's noted delinquencies are still low in historical terms.

Adjustable-rate mortgages securitized in 2006 drove the increase, the ratings agency said. Jumbo ARMs from last year are performing similarly to the 2001 ARM vintage. But, after adjustments for rapid prepayments on the 2001 vintage -- "2006 show weaker performance during their first year than in any of the five previous vintages."

And while jumbo delinquency had eased to 0.379 percent in March, Moody's said its jumbo mortgage 60+ day delinquency rate index increased to 0.397 percent in April.

A report from Standard & Poor's last month indicated prime jumbo loans backing 2006 vintage securitizations and seasoned 12 months had a 30-day or greater delinquency level of 2.2 percent -- approaching levels not seen since the 2000 vintage at 12-months seasoning. Delinquency of 90 days or more is at 0.70 percent -- eclipsing the levels seen in all years since 2000.

"Although certain layered risk characteristics such as simultaneous seconds and higher CLTVs have increased in prime jumbo loans in recent years, the impact on performance hasn't been as dramatic as experienced in the subprime market," S&P said in last month's announcement. "This is primarily due to the better credit quality of prime jumbo borrower."

Moody's seemed to echo S&P's sentiment, adding, "Jumbo performance is still strong in spite of the rise in delinquencies, which are weakening in comparison to particularly strong performance over the past several years."


2006 Jumbo, Alt-A Performance Deteriorates
The performance of Alt-A and jumbo loans backing 2006 vintage securitizations continued to deteriorate. Nearly half of first quarter jumbo issuances were backed by California transactions.

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