Jumbo Overdue Rate Jumps

Serious delinquencies on securitized jumbo mortgage loans increased sharply in July and August, according to Moody's Investors Service.

At the end of August, Moody's said the percentage of jumbo mortgages more than 60 days past due reached 0.300%. That was 40% higher than the year earlier delinquency rate. 0.089% of jumbo loans were more than 90-days past due, almost 30% higher than one year earlier.

The index also found a 58% increase in REO and a 48% increase in foreclosures compared to August of 2005.

Moody's attributed the rising delinquency rate to the slowdown in home price appreciation, a weakening housing market, and rising interest rates.

And don't blame exotic loans made to subprime borrowers for the problem. Moody's jumbo mortgage indexes are comprised of pools of first-lien mortgages made to prime credit quality borrowers. The index tracks pools that have at least three months of seasoning.

Borrowers find fewer refinancing options and have more difficulty selling their homes if they run into trouble, Moody's noted.

Moody's noted that the August prepayment rate was 45% lower than a year earlier, an indication that higher rates have slowed down the refinancing market. In August of this year, the average 30-year mortgage rate was 6.52%, according to Freddie Mac. In August of last year, the 30-year average rate for new loans was 5.82%.

The August jump in jumbo delinquencies was the second straight month that the rate has increased. And Moody's warned that the pace of credit quality deterioration quickened in August. (c) 2006 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com

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