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Delinquency on the Rise for Vintage Prime Mortgages

Performance on vintage prime residential mortgage-backed securities (RMBS) continues to degrade, ""Fitch Ratings"":http://www.fitchratings.com/web/en/dynamic/fitch-home.jsp revealed in a report.


The ratings agency announced a downgrade on 6 percent of its rated prime RMBS classes, many of which fall into the pre-2005 category. Fitch attributed the downgrade to increased delinquency rates in certain pools.


""The deterioration in performance in pre-2005 RMBS has been driven by adverse selection in the small remaining mortgage pools,"" Fitch said in a release. ""Record-low mortgage rates driven by the Federal Reserve and sustained by economic uncertainty have led most pre-2005 borrowers to refinance. Consequently, the remaining mortgage pools are increasingly concentrated with borrowers unable to refinance due to credit obstacles.""

As delinquency rates increase in older prime pools, performance has improved for Alt-A, subprime, and more recent vintage prime pools. The rate of remaining pre-2005 borrowers rolling into delinquency is 1.5 times higher today than three years ago, and total delinquency is roughly 1.3 times higher than 2011 levels.

Fitch placed 15 percent of all rated prime RMBS classes on Rating Watch Negative in September, citing much of the same data. As of the most recent review, approximately 14 percent of all classes remain on negative watch and are at risk for a further 1-2 rating category revision.


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