(NEW YORK) Sub-prime mortgage bonds created in the first half of this year contain loans that are going delinquent at the fastest rate ever, according to Moody’s Investors Service.
The average rate of ‘serious loan delinquencies’ in the securities has been higher than 2006 bonds, Moody’s analysts Ariel Weil and Amita Shrivastava wrote in a report.
Serious loan delinquencies are those 60 days or more past due, including properties in foreclosure or already foreclosed upon.
‘It is shocking what you see,’ said Kyle Bass of Hayman Advisors. ‘Anything securitised in 2007 has got to have the worst collateral performance of any trust I’ve seen in my life.’
Moody’s, Standard & Poor’s and Fitch Ratings have been downgrading sub-prime securities issued in 2006, and Fitch said it’s now reviewing ratings on bonds created in 2007.
Moody’s has cut ratings or placed on review 496 bonds backed by first mortgages issued last year, or 3 per cent of such bonds created in 2006.
Through Sept 21, S&P had cut ratings on 433 securities from last year and backed by sub-prime loans, or 9.1 per cent of the total.
Fitch on Wednesday cut ratings on US$18.4 billion of bonds backed by sub-prime loans.
The Moody’s report compares with research from S&P in March that said 2006 bonds may be the worst performing ever.
For bonds older than six months, 2006 was the worst year for serious delinquencies since at least 2000, Moody’s said in the report. Data in the Moody’s report suggests that accelerating delinquencies from 2007 bonds are likely to eclipse 2006.
Source: Bloomberg (Business Times 6 Oct 07)