U.S. Alt-A, Subprime RMBS Look a Little Better

Serious delinquencies for U.S. alt-A residential mortgage-backed securities declined month-to-month for the first time in four years and subprime performance also improved for the second month in a row, according to Fitch Ratings. Alt-A RMBS delinquencies dropped to 34.1% in April from 34.4% in March but are still up from 27.4% in April 2009. Subprime RMBS delinquencies in April slid to 45.2% from 46.3% the prior month but continue to be higher than the 40.1% a year ago. Fitch attributed the improvements to more loan modification activity and better liquidation and roll rates. But Fitch also noted that since 35% of subprime loans and 8% of the alt-A loans are modified these loans face redefault risk, which could hurt performance going forward. Managing director Vincent Barberio said the next few months could determine whether the trends signal a turnaround in alt-A and subprime or a more short-lived seasonal uptick. Prime jumbo performance in April deteriorated slightly month-to-month, but the delinquency rate in this category continues to be far better than that of loans in the two other categories. Prime jumbo RMBS during the past month saw 60-plus day delinquencies rise to 10.2% from 10.1% the previous month.