Analysts: Jumbo, Alt-A RMBS More Vulnerable

Jumbo and alternative-A residential mortgage-backed securities appear more vulnerable to a rise in unemployment than do subprime RMBS, Wall Street researchers told attendees at a Standard & Poor's conference in Orlando.Higher unemployment is seen as more of an issue for jumbo and alt-A RMBS in part because the level of credit enhancement for these securities is relatively thin, leaving not a lot of room for losses in the event that they "blow up," said Peter DiMartino, a managing director at RBS Greenwich Capital. Low loan-to-value ratios and high credit scores in the jumbo/alt-A sector generally look attractive compared with those in the subprime sector, but some bond buyers might be "better off" investing in B&C-credit RMBS if there is more unemployment, said Thomas Zimmerman, an executive director at UBS Warburg, in a roundtable discussion at the S&P structured finance seminar.