Subprime, Alt-A Delinquencies Rise
Homes, now owned by Berkshire Hathaway and called Clayton Holdings, (not to be confused with Clayton Homes, a subsidiary of Berkshire Hathaway)*, has warned that Subprime and Alt-A delinquencies in the U.S. are still rising. This suggests that the fundamental problem underlying the banking crisis has not been addressed.
At its core, the credit crisis is the result of excessive lending against inflated residential property assets. Banks have been forced to write down over $500 billion in order to reflect losses on this lending. However, as recently as July, Jamie Dimon of JPMorgan Chase warned that residential mortgage losses were seeping into higher quality credits (see story here).
Now Housing Wire is reporting that Clayton confirms this continued deterioration in delinquencies and eventual mortgage-related losses in the U.S.
Performance in recent vintages of both subprime and Alt-A mortgages continued to deteriorate during August, according to data released recently by Clayton Holdings, Inc. The company’s monthly InFront report noted that 60+ day delinquencies for both Alt-A and subprime mortgages had increased, while cure rates had decreased; interestingly, however, roll rates — which measure the percentage of loans that worsened in delinquency status — decreased in most areas.
For 2006 subprime first liens, the 60+ day delinquency percentage reached 40.24 percent, a jump of 5.49 percent from the prior month; for 2007 vintage loans, 30.82 percent were 60 or more days delinquent, up 6.05 percent. Relative to other comparable vintages, both the 2006 and 2007 subprime vintages continue to perform significantly worse than other recent peers.
Alt-A loans fared comparatively worse, with 2006 vintage first liens recording 60+ day delinquencies of 25.26 percent, up 9.44 percent from the prior month; the 2007 vintage saw delinquencies rise a whopping 16.43 percent to 22.65 percent, Clayton said.
Please click source link below for the full article.
Subprime, Alt-A Delinquencies Rise in August: Clayton – Housing Wire
*This post has been updated to reflect the fact that Clayton Holdings is not the same company as Clayton Homes.