Losses on 2008 vintage to exceed 12% as future loss severity averages 50%.

Moody’s now expects cumulative lifetime loss projections for US prime residential jumbo mortgage backed securities (RMBS) of 3.8% for 2005 securitizations, 8.0% for 2006 securitizations, 10.9% for 2007 securitizations and 12.3% for 2008 securitizations.

“Since our previous loss projections published on March 2, serious delinquencies (defined as loans that are 60 or more days delinquent, in foreclosure, or held for sale, i.e. real estate owned or REO) on prime jumbo pools for the 2005, 2006, 2007 and 2008 vintages have increased substantially to 3.3% from 2.2%, 6.2% from 3.8%, 7.9% from 4.8% and 8.0% from 4.6%, respectively. We expect delinquencies and losses on prime jumbo pools to continue to rise in 2010 as house prices continue to decline and unemployment levels continue to rise. In the previous loss projection update we expected these key macroeconomic variables to moderate by the end of 2009.”

“The loss upon default (severity of loss) on jumbo loans has also been rising in the last year. As house prices continue to depreciate, future loss severities are expected to reach around 50% on average, putting further pressure on loss expectations.”

“Further, recent government efforts to curb loan defaults and foreclosures through loan modification have thus far failed to gain the previously expected traction3, prompting us to reduce the average modification benefit to projected prime jumbo losses across vintages from 15% predicted earlier to less than 5% going forward.”

Related posts:

1. Continuation of Deterioration in Jumbo Mortgage Market according to Fitch
2. Jumbo Mortgage Delinquencies Soar
3. Is the Jumbo mortgage market beginning to thaw?
4. Lenders easing up on jumbo mortgages

foreclosures · jumbo mortgage

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