Moody's: Jumbo Delinquencies Rise, Remain Historically Low

For the third straight quarter, prime jumbo mortgage delinquency rates rose during the first quarter of 2007, according to a recent report from Moody's.

Moody's jumbo mortgage 60-plus-day delinquency rate index stands at 0.37% for the first quarter, compared to 0.29% in the first quarter 2006. Despite the rise, serious delinquencies continue to remain relatively low in historical terms.

The current level of serious delinquencies is comparable to that recorded by Moody's index in the latter half of 2003, although direct comparisons across time periods can be difficult due to changes in the composition of the index as well as the seasoning of the pools that are included.

Regardless, serious delinquencies have risen steadily over the past few quarters, reflecting in part a less favorable mortgage environment characterized by higher interest rates and a slower pace of home price appreciation.

A main factor in the index's deterioration is the performance of the 2006 ARM vintage, which at an early stage has registered performance similar to the 2001 ARM vintage, the first and so far weakest origination year included in the index.

After adjusting for the effect on delinquencies of the rapid prepayment of the 2001 vintage, ARMs from 2006 show weaker performance during their first year than in any of the five previous vintages.

In terms of its May report, following a one-month respite in which serious delinquencies fell slightly, Moody's 60-plus-day jumbo mortgage delinquency rate index rose again during April 2007. The index, composed of securitized prime jumbo mortgage pools, registered a serious delinquency rate of 0.4% in comparison to 0.38% in March.

In April 2006, the serious delinquency rate measured 0.28%.

According to Moody's, despite the rise in delinquencies, which are weakening in comparison to particularly strong performance over the past several years, jumbo performance is still strong.

Among the reasons for the performance deterioration are slower home price appreciation and higher interest rates, which can restrict refinancing opportunities for troubled borrowers, as well as the influence of the 2006 ARM vintage, which has experienced higher delinquencies relative to the preceding three origination years. (c) 2007 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.bondbuyer.com/ http://www.sourcemedia.com/