RE: Bye Bye Banks!Despite the trillions of dollars, yes trillions, in stimulus and a specific government mortgage loan modification program, Moody's just reported that mortgage securities are rapidly deteriorating. Of course, the media has been ordered not to communicate this devastating financial tidbit to the masses. Hmmm I hope BNS management is will to give back their year end bonuses if any of this comes back to bite us in the butt. Stay tuned. GLTA
Rapid Deterioration Leads Moody's To Increase Loss Projections For Prime Jumbo RMBS
Thursday, January 21, 2010
Losses on 2008 vintage to exceed 12% as future loss severity averages 50%.
Moody’s now expects cumulative lifetime loss projections for US prime jumbo residential 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 in March2, 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 rapidly deteriorating performance of prime jumbo pools combined with continued adverse macroeconomic conditions prompted this revision.
“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 traction, 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.”