Wednesday, August 06, 2008

Freddie: Alt-A and Default by Year

by Bill McBride on 8/06/2008 12:18:00 PM

On Alt-A from Brian:

[Freddie has] $190B of Alt-A in the guarantee portfolio, $93B of which is in their 7 high DQ states (CA, FL, AZ, VA, NV, GA, MI, MD), and $115 of which is 06/07 vintage. 29% have current LTV>90% and 17% have current LTV >100% (chart 27 has a matrix of different cuts at the guarantee portfolio - there are quite a few high risk loan categories where the % of loans with current LTV>100% is in the range of 15-30% of the portfolio - with more to come as house prices decline further - chart 28 is worth a look too - there is going to be a lot of loss content in some of the cells on that matrix)

90+ day DQ's on their Alt-A book increased from 2.32% in Q1 to 3.72% in Q2!

They have $82B of uninsured 1st Lien subprime ABS, $65B of which is 06/07 vintage. The have $21B of ALT-A ABS.

On the credit enhancement question from before, for their guarantee portfolio as a whole, 18% has credit enhancement, but 92% of the loans with >90% LTV have enhancement, but only 16% of the Alt-A have it, only 14% of the IO loans have it, and 13% of option ARMs have it.
Freddie Mac Alt-A Click on graph for larger image in new window.

This graph from the Freddie investor's slides shows the default rates of Alt-As vs. the rest of the portfolio.

As we've been discussing, the 2nd wave of defaults it just starting, and Alt-A will be ground zero this time.

The second graph shows delinquencies by year, and shows the impact of the credit crunch.

Freddie Mac Default by Year From Brian:
Finally, Chart 32 is a great graphical depiction of moral hazard in action. It shows delinquencies by book year and 2006 is looking very good, but 2007 (on a relative basis) is off the charts because they caved to political pressure and took on all those crappy loans when the private label MBS market shut down.

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