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Jumbo Delinquencies Continue to Climb
By James Comtois
Although nowhere near as dire, it appears as though the jumbo loan sector may be following in the footsteps of the declining subprime market. Prime jumbo mortgage performance began 2007 with trends similar to those that ended 2006, according to Moody's latest Jumbo Mortgage Credit Indexes. In other words, delinquencies are continuing to rise.
In January 2007, the rate of serious delinquencies on securitized jumbo mortgage pools reached 0.349%, an 18% increase over its year-prior level of 0.297%. Foreclosure and REO rates -- at 0.108% and 0.037% -- are still low in absolute terms, but have seen large percentage increases over the past several months. The proportion of loans in REO has more than doubled since the previous January, up a whopping 112% to 0.037% in January 2007 from 0.017% in January 2006.
According to Moody's, at the front end, 30- to 59-day delinquencies were relatively flat, at 0.554%, compared to one year earlier, after registering some deterioration in recent months. The 60- to 89-day delinquencies, on the other hand, rose significantly -- at 0.107%, up 18.4% -- from the year earlier period.
Moody's Jumbo Mortgage Indexes are comprised of pools of first-lien mortgages made to prime borrowers backing Moody's rated securitizations. A substantial majority of loans in the indexes are of jumbo size, or larger than the government-sponsored entity conforming balance. The securities covered in the report are those not guaranteed by the GSEs, Fannie Mae and Freddie Mac, which purchase loans only within legislated size limits.
In 2007, the limit for one-family homes is $417,000, with the exception of those in Alaska, Hawaii, Guam and the U.S. Virgin Islands, where the limit is 50% higher than for the rest of the country.
Moody's indexes exclude subprime pools and alt-A-only pools. Some originators include some alt-A-quality loans in predominantly jumbo pools. In such cases, some alt-A loans would be included in the indexes.
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