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In what seems to be becoming a trend, delinquencies for U.S. Alt-A and subprime residential mortgage-backed[IMAGE]
securities (RMBS) declined once again in May, while prime RMBS late-pays continued to increase, New York-based ""Fitch Ratings"":http://www.fitchratings.com/index_fitchratings.cfm reported Monday.
While the month-to-month decreases in Alt-A and subprime delinquencies were encouraging, Fitch said the improvements were tempered by a bounce back in roll rates. ""A sustainable decline in delinquencies is difficult to achieve without an accompanying decline in roll rates,"" said Vincent Barberio, managing director at Fitch. ""The short-term beneficial effect of tax refunds may have run its course.""
According to Fitch’s latest Performance Metrics results, Alt-A RMBS delinquencies fell to 33.9 percent in May from 34.1 percent in April, representing the second month-to-month decline following a steady four-year increase.
[COLUMN_BREAK]But delinquencies were still up from 28.3 percent in May 2009. Roll rates rose to 3.1 percent in May after falling sharply to 2.6 percent in April, Fitch said. Prior to April's improvement, roll rates had not been below 3 percent since June 2008.
In addition, Fitch said subprime RMBS delinquencies fell for the third straight month in May, dipping down to 44.8 percent from 45.2 percent the month prior. However, delinquencies were above the 40.7 percent rate of a year ago. Fitch said roll rates for May jumped to 4.3 percent from 3.9 percent the prior month but remained well below the trailing 12-month average of 5.4 percent.
Despite the change in performance, Fitch cautioned that approximately 9 percent of performing Alt-A loans and 37 percent of performing subprime loans are modified and have a substantial risk to re-default.
When it comes to prime RMBS, Fitch said delinquencies continued to increase in May, but only slightly. After nearly tripling in 2009, prime late-pays have jumped another 1.1 percent since the beginning of the year, the ratings agency said.
According to its report, prime jumbo RMBS 60-plus day delinquencies rose to 10.3 percent in May, up from 10.2 percent in April and 5.9 percent during the same month last year. Additionally, May role rates rose above 1 percent after dipping below that level in April. However, Fitch said roll rates remained below their highest-ever level in Performance Metrics history, which was 1.4 percent recorded in March 2010.
